note demonetisation

On demonetisation anniversary, a look back at how hard the note ban hit ordinary Indians

Highlights of Scroll.in’s coverage of the disruption caused by Narendra Modi’s decision and its effects on the common man.

As India marks the first anniversary of demonetisation on November 8, it has become difficult to examine exactly what effects the abrupt withdrawal of 86% of currency has had on the economy. Partly, this is due to how nebulous the move itself was, with the government selling it as a panacea for everything from corruption to stone-pelting to idle savings. But the hurried roll-out of the Goods and Services Tax in July this year, leading to even more disruption in the economy, has made it even harder to gauge the effects of the note ban.

While we grapple with six straight quarters of slowing Gross Domestic Product growth, the debate about demonetisation has increasingly turned to whether it achieved the outcomes the government had set out. That debate, however, is incomplete if it does not take into account the pain and disruption caused by the move and whether its supposed gains, if any, were commensurate with the huge costs.

Tremendous hardship

To get a sense of how deeply the policy hurt Indians, it is worthwhile to glance back at the reportage after the note ban was announced. On the evening on November 8, Prime Minister Narendra Modi announced that Rs 500 and Rs 1,000 notes were no longer valid, and the government would introduce new Rs 500 and Rs 2,000 notes – a process that ended up taking months to complete. Anyone holding old notes had to deposit them in banks, which were soon overburdened with long hours of work, massive queues and a shortage of new notes to give out.

The result: people often found it tremendously hard to make do without cash. In Maharashtra, for example, people were unable to buy medicines or pay for treatment because the exemption allowing old notes to be used at hospitals only applied to government facilities. Adivasi villagers outside Mumbai were forced to eat just rice, with no vegetables, because their money had become useless in the market. Women who were not in the banking system were hit hard. Wage workers were either stuck without pay or given older notes, and many of them working in other states had to return home because employers were simply unable to withdraw currency notes to pay them.

Food markets froze, with commodity prices staying stable because barely any actual buying or selling took place. Small and medium enterprises in Punjab registered an 80% drop in production, and saw hordes of labourers returning home without any work or pay.

Compensation rumour

As they waited in line to either deposit cash or get access to the few new notes in circulation, people in Allahabad discussed rumours that Modi would find a way to deposit money into each person’s personal bank account once the massive task was complete. Indeed, across the country there were people undergoing tremendous hardship yet not complaining, labouring under the belief that the government’s efforts would end corruption and eventually offer them some sort of compensation after having collected huge amounts of black money. No such proposal to deposit money into bank accounts has yet been put forward by the government.

Bank managers were stuck dealing with long hours, angry customers, angrier employers and did almost none of the regular work – of giving out loans – that kept local economies going. Traditional forms of trade, like women of the Waghri community exchanging utensils for old clothes, had to stop because middlemen could not pay.

Chennai was hit particularly hard as failing electricity and internet services in the wake of Cyclone Vardah made the “cashless economy” seem like a mirage. Unemployment in Bundelkhand became so severe people were pushed to the brink of starvation. Rural jobs schemes in parts of the country fell apart, with no money to pay workers. Amidst all this, conmen preyed on people who believed they were eligible for additional exemptions, stealing lakhs of rupees.

No respite

By the end of the three-month period during which people were allowed to deposit their cash, demonetisation started to bite. Food markets saw commodity prices crash since a good monsoon had led to a bumper crop. Tomato farmers were destroying their crops on a scale never seen before, just so they could clear the fields for the next season. Every link in the supply chain of the Maharashtra textile industry was hit. Adivasis in Maharashtra were still getting only IOUs instead of cash. Even multinational corporations that did not rely on cash saw their numbers drop precipitously.

By June 2017, after the Bharatiya Janata Party had pulled off a stunning election victory in Uttar Pradesh, the economic damage caused by the note ban started to become clearer. In August, the Reserve Bank of India confirmed that nearly all demonetised notes had returned to banks dashing the government’s hope that a huge amount would go unreturned.

Out in the real world, 10 months after demonetisation, Ludhiana’s garment hub was still facing losses, with the botched roll-out of the GST adding to the disruption. In Delhi’s largest industrial area, labourers continued to have a hard time finding work. In Chennai’s flower market – where flowers were first dumped and continued to see low volumes a month later – demonetisation is credited with making people aware of a politician they wouldn’t have otherwise known to blame: Modi. And a supposedly cashless village in Maharashtra had returned to using cash, not least because of connectivity problems and a lack of cards.

Today, a year later, Union ministers are arguing that demonetisation was simultaneously a massive success and that it is too soon to say what its effects on the economy has been. Politicians and economists of all stripes are arguing about what the move did to India’s economic activity, with the general agreement being that its benefits are unclear but the costs hang heavy. A conclusion, however, cannot be made without taking a closer look at how deeply disruptive this surprise policy was to the lives of people across the country and even beyond.

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German expats talk about adapting to India, and the surprising similarities between the two cultures.

The cultural similarities between Germany and India are well known, especially with regards to the language. Linguists believe that Sanskrit and German share the same Indo-Germanic heritage of languages. A quick comparison indeed holds up theory - ratha in Sanskrit (chariot) is rad in German, aksha (axle) in Sanskrit is achse in German and so on. Germans have long held a fascination for Indology and Sanskrit. While Max Müller is still admired for his translation of ancient Indian scriptures, other German intellectuals such as Goethe, Herder and Schlegel were deeply influenced by Kalidasa. His poetry is said to have informed Goethe’s plays, and inspired Schlegel to eventually introduce formal Indology in Germany. Beyond the arts and academia, Indian influences even found their way into German fast food! Indians would recognise the famous German curry powder as a modification of the Indian masala mix. It’s most popular application is the currywurst - fried sausage covered in curried ketchup.

It is no wonder then that German travellers in India find a quite a lot in common between the two cultures, even today. Some, especially those who’ve settled here, even confess to Indian culture growing on them with time. Isabelle, like most travellers, first came to India to explore the country’s rich heritage. She returned the following year as an exchange student, and a couple of years later found herself working for an Indian consultancy firm. When asked what prompted her to stay on, Isabelle said, “I love the market dynamics here, working here is so much fun. Anywhere else would seem boring compared to India.” Having cofounded a company, she eventually realised her entrepreneurial dream here and now resides in Goa with her husband.

Isabelle says there are several aspects of life in India that remind her of home. “How we interact with our everyday life is similar in both Germany and India. Separate house slippers to wear at home, the celebration of food and festivals, the importance of friendship…” She feels Germany and India share the same spirit especially in terms of festivities. “We love food and we love celebrating food. There is an entire countdown to Christmas. Every day there is some dinner or get-together,” much like how Indians excitedly countdown to Navratri or Diwali. Franziska, who was born in India to German parents, adds that both the countries exhibit the same kind of passion for their favourite sport. “In India, they support cricket like anything while in Germany it would be football.”

Having lived in India for almost a decade, Isabelle has also noticed some broad similarities in the way children are brought up in the two countries. “We have a saying in South Germany ‘Schaffe Schaffe Hausle baue’ that loosely translates to ‘work, work, work and build a house’. I found that parents here have a similar outlook…to teach their children to work hard. They feel that they’ve fulfilled their duty only once the children have moved out or gotten married. Also, my mother never let me leave the house without a big breakfast. It’s the same here.” The importance given to the care of the family is one similarity that came up again and again in conversations with all German expats.

While most people wouldn’t draw parallels between German and Indian discipline (or lack thereof), Germans married to Indians have found a way to bridge the gap. Take for example, Ilka, who thinks that the famed differences of discipline between the two cultures actually works to her marital advantage. She sees the difference as Germans being highly planning-oriented; while Indians are more flexible in their approach. Ilka and her husband balance each other out in several ways. She says, like most Germans, she too tends to get stressed when her plans don’t work out, but her husband calms her down.

Consequently, Ilka feels India is “so full of life. The social life here is more happening; people smile at you, bond over food and are much more relaxed.” Isabelle, too, can attest to Indians’ friendliness. When asked about an Indian characteristic that makes her feel most at home, she quickly answers “humour.” “Whether it’s a taxi driver or someone I’m meeting professionally, I’ve learnt that it’s easy to lighten the mood here by just cracking a few jokes. Indians love to laugh,” she adds.

Indeed, these Germans-who-never-left as just diehard Indophiles are more Indian than you’d guess at first, having even developed some classic Indian skills with time. Ilka assures us that her husband can’t bargain as well as she does, and that she can even drape a saree on her own.

Isabelle, meanwhile, feels some amount of Indianness has seeped into her because “whenever its raining, my body instantly craves chai and samosa”.

Like the long-settled German expats in India, the German airline, Lufthansa, too has incorporated some quintessential aspects of Indian culture in its service. Recognising the centuries-old cultural affinity between the two countries, Lufthansa now provides a rich experience of Indian hospitality to all flyers on board its flights to and from India. You can expect a greeting of Namaste by an all-Indian crew, Indian food, and popular Indian in-flight entertainment options. And as the video shows, India’s culture and hospitality have been internalized by Lufthansa to the extent that they are More Indian Than You Think. To experience Lufthansa’s hospitality on your next trip abroad, click here.

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This article was produced by the Scroll marketing team on behalf of Lufthansa as part of their More Indian Than You Think initiative and not by the Scroll editorial team.