PRIME Minister Modi’s fifty days of ‘pain’ are getting over on December 30, 2016. But the reports and studies on the impact of demonetisation show that the ‘short term pain’ will lead to no ‘long term gain’. Rather its impact on employment and production may hit the majority of the workforce in the country. This is particularly true of people in informal employment or labour relations, both in the organised and unorganised sectors. Along with this the impact on self employed people and unincorporated single person or two person enterprises who constitute more than sixty percent of all enterprises in the non-agricultural sector also needs to be taken into consideration. Taken together, about 92 percent of people work outside the scope of the labour laws and social protection and their recognition and rights as ‘workers’ has been continuously undermined by neo-liberal policies of which demonetisation has  become the main instrument.

THE DISPLACEMENT

OF LIVELIHOODS

One of the central impacts of demonetisation has been the displacement of livelihoods of the unorganised sector workers and small establishments. Early reports of demonetisation focused largely on the impact on daily wage workers. As early as November 14, ie, within six days of demonetisation media reports showed that construction workers had stopped getting work and were being paid only in old notes. A series of other articles started documenting the adverse impacts of the initiative. In Modi’s own constituency, Banaras, the silk industry has been hit hard. The generous donator to his election campaign Gujarati businessman and head of the Banaras Vastra Udyog Sangh, says his business has been hit by about 70 percent and thousands of weavers have lost their jobs because he has no money to pay them. In another export house only three out of eight looms are working. A worker gets about Rs 300 per day on the handloom and about Rs 500 per day on the powerloom. But both the looms have stopped working since demonetisation hit the industry. Another example of the hit taken by the manufacturing industry is Agra’s leather industry whose entire value chain is cash based. The ASSOCHAM reports that production is down by around 60 percent in Chennai and 75 percent hit in the tannaries of Agra, Kanpur and Kolkata due to the non-arrival of hides. The study notes that butchers are unwilling to give hides because they are not paid in cash. Employment in the leather industry has also gone down by 75 percent as workers are not being paid in time. Industry sources say that it will require at least 9-12 months to recover from the impact if remonetisation takes place adequately. If not, their industry is expected to suffer to a greater industry. There is a similar story of the small scale glass industry in Ferozabad which requires Rs 2 lakh per day in cash for its production. The Glass Industrial Syndicate indicates that 90 out of the 100 glass bangle factories have downed their shutters as they are not able to pay their raw material suppliers or truck drivers. These examples indicate an indiscriminate slow down in the manufacturing sector, with severe loss of jobs and growing unemployment. They also indicate that the slowdown in the manufacturing sector has been steep in the month of November. The PMI (Purchase Managers Index) which is an indicator of the health of industry shows a downfall from 54.5 percent in October 2016 to 46.7 percent in November 2016. This sharp fall indicates that the demonitisation has had a cascading adverse impact on the manufacturing economy.

A similar situation is seen in the agricultural sector. After the first week of demonetisation a slew of measures were announced to facilitate the farmer’s access to seeds and credit. However these limited measures seem to have had a very small impact. An investigation into the impact of demonetisation on Azadpur mandi of Delhi showed that the daily business volumes have decreased from 50-70 percent in the last one and a half months. Large wholesale traders and commission agents speak of business contracting from all sides: consumers are buying less, arrivals of produce have decreased. Big middlemen say that they are only surviving because truck drivers were taking old notes to buy their diesel and petrol. However, they too will stop soon once the deadline gets over. This situation in the agricultural market has had an adverse impact on small and medium farmers, many of whom do not have bank accounts and only operate on the basis of cash. Similar is the case of the Pathardi market in Maharashtra where the arrival of cotton has reduced by 80 percent and supply of other agricultural produce by almost 75 percent. Some farmers are forced to sell their produce to traders who have not been certified by the APMC because they do not want old notes. In such a case they incur huge losses.

SELECT CORPORATES GAIN

FROM ‘ANTI-CORRUPTION’ DRIVE

The general slowdown in employment and production in the entire economy has had a devastating impact on the livelihoods of small producers and workers. But it has also been profitable for some select sectors, particularly e-commerce sites and digital companies that help consumers to pay online. Though prime minister has been saying that the move towards a cashless society will help to fight corruption, it is quite clear that the benefits of this so-called anti-corruption crusade will not reach the working poor. Within the last one month the government has unearthed unaccounted for black money in new notes. This shows that there is no strong link between the demonetisation drive and the attempt to make India black-money free. Rather the drive is carefully structured to benefit few digital companies, all of whom have the backing of big corporate and transnational capital.

In this context, it is interesting to note that biggest beneficiary of the drive has been Paytm, a company powered by the Chinese Alibaba group and its financial arm Ant Finance. According to its own estimates, the Paytm has expanded within the last two months to include seven million transactions a day, an increase of about 250 percent. Mobikwik, another digital wallet powered by Japanese investors and hedge fund companies like Tree Line Asia raised a whopping Rs 155 crores to expand their operations in the same period. The third operator Freecharge which was brought over by Snapdeal has been powered by American Express, Cisco and some Chinese investors. Freecharge recorded a daily increase of 12 times in its transactions. This rapid growth shows that the demonetisation drive is helping transnational capital to penetrate all sectors of the Indian economy.

It is clear from the foregoing discussion that most workers and producers in the unorganised sector are very adversely affected by demonetisation. At the same time the benefits of demonetisation have largely gone to transnational capital backed digital business enterprises. Hence, the prime minister’s claims that demonetisation is a fight against corruption is an ideological ruse to mislead the people instead of solving their problems of livelihood. This discourse of corruption largely ignores the exploitation and penury of the working poor and attempts to build a hegemonic discourse that does not question this pro-corporate policy. In this situation it is imperative that the Left and democratic forces counter the BJP’s claims both, ideologically as well as in terms of daily struggles to meet the needs of the working poor. The demystification of the anti-corruption discourse is essential for this purpose, and needs to be intensified on an urgent basis.