India's poor hit hard as cash crunch continues

Indian farmers feeding tomatoes to livestock at Medha village, about 40km from Ahmedabad in Gujarat state. Demand for vegetables has slumped in India as people do not have money to pay for them.
Indian farmers feeding tomatoes to livestock at Medha village, about 40km from Ahmedabad in Gujarat state. Demand for vegetables has slumped in India as people do not have money to pay for them.PHOTO: AGENCE FRANCE-PRESSE

NEW DELHI • First, Mr Yashpal Singh Rathore's marriage was delayed by his future in-laws, who, like most Indians, ran short of cash after Prime Minister Narendra Modi banned the country's largest currency notes in November.

Then he lost his job when the cash crunch hit demand for motorcycles and scooters sold by the company he worked for, Hero MotoCorp.

After that, the prospective in-laws refused to let the wedding go forward until he found another job.

"So I lost my job and I lost my marriage," the 29-year-old said in an interview at a protest, where he shouted slogans with more than 100 workers let go by Hero.

Mr Rathore is one among a large number of Indians - the precise number is not known - who have lost their jobs since Nov 8, when Mr Modi abruptly banned 86 per cent of the country's currency in a bid to eliminate "black money," currency on which taxes had not been paid.

For the sake of secrecy, the government largely avoided printing replacement notes in advance. So there has been an acute and protracted shortage of cash as the government struggles to catch up.

That, in turn, has proved economically damaging. Demand for vegetables is declining as people do not have the money to pay for them, for example, and some service industries are reporting steep job losses.

"This has actually hurt the poor enormously," said Mr Nasser Munjee, chairman of DCB Bank.

Many who lost their jobs were at first convinced by Mr Modi's speeches that their setbacks were transitory and, in the long run, would be worth the suffering.

But as the crisis drags on, some are growing frustrated.

Many are forced to go without fruit, vegetables and milk - now unaffordable luxuries. Most have not paid apartment rents or their children's school fees in the months since the cash ban. Many sent their families back to the villages, where things are cheaper.

The decline in vegetable demand is so steep that the prices of eggplants, potatoes, cauliflower and tomatoes have dropped between 42 per cent and 78 per cent, a research group said.

In the first month alone after the currency ban, micro- and small-scale service industries cut staff by 35 per cent, the All India Manufacturers' Organisation said.

Mr Rathore said he thought about giving up and returning to his village 1,200km south of Delhi, but he just cannot bear to do so, at least not yet. "What can I do in my village?" he asked.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on January 25, 2017, with the headline 'India's poor hit hard as cash crunch continues'. Print Edition | Subscribe