note demonetisation

The demonetisation effect on border town Raxaul: Income loss, dependence on Nepalese currency

Some residents say the Rs 2,000 note was a stupid idea, others are all for the government policy.

In Raxaul, a town on the India-Nepal border in Bihar’s East Champaran district, public opinion is split on “notebandi”.

Its effects were palpable as one walked around the town’s bazaar, packed with stores selling clothes, household durables and jewellery, all open but almost all of them empty. Inside, staff sat idle while shopkeepers chatted with each other. “Market mein jaan nahin hain,” said a man selling belts at a roadside stall. The market is dead.

Further down the road, the vegetable market showed more signs of life. Unlike consumer durables, where retailers have little room to reduce rates, India’s food economy has dropped prices as demand fell. And so, there was more activity here. A man unloaded squawking hens from a mini-truck. A labourer hauled a sack of cauliflowers on to a bike. People milled around, asking for the price of vegetables.

However, business is slower that usual here too. “I am doing 50% of the business I usually do,” said a man selling methi from a plastic sheet spread by the roadside. “There is no change. People keep coming with Rs 500 notes. And I have to turn them away.”

He used to earn Rs 500 a day but just manages Rs 200 these days. This narrative of steep drops in income is all too familiar in this border town.

There is little liquidity here. Step inside the State Bank of India branch on the town’s main street and there are so many queues, it looks like a railway reservation centre from the 1980s.

Small traders are making do with Nepalese currency but larger businesses are stuck. Take the case of Manoj Kumar, who runs a trucking firm called Shree Sangam Transport. To dispatch a truck, he needs Rs 25,000. Which means that, given the government’s withdrawal limit of Rs 50,000 a week from a current account, he cannot send out more than two trucks. But even that is impossible, he said, as the banks do not have any money. “We get what the banks can give,” he added.

For and against 

This is the refrain one hears repeatedly in this town. So, this reporter asked the people what they thought about the government’s demonetisation decision. Some, like Sona Lal, a wholesaler of dried red chillis, are furious. “All this talk that farmers should put money in banks – do banks make it easy for people to transact there?” he asked. “If I want to deposit more than Rs 49,000, I have to show a PAN number. How many farmers have a PAN number?”

That is a valid point. Given that the government will not accept Rs 500 and Rs 1,000 notes after December 30, people – farmers, migrant workers, whoever – without permanent account numbers have little time to get one. With the government also stopping the exchange of demonetised notes, they have few alternatives to selling their cash to touts at a discount.

Lal said the entire demonetisation plan was poorly thought out. “That Rs 2,000 note is a stupid idea, no one will give you change,” he said. About all the talk of moving towards a cashless economy, he said, “The prime minister says he used to sell chai but did he ever see anyone swipe to pay for tea?”
 But forget us, he added, the worst affected by the cash crisis are the urban poor. “In villages, people will still find food and water but in cities, you need money for everything – from house to food to water,” Lal said.

Other residents were more sanguine. Some alluded to Prime Minister Narendra Modi’s statement, shortly after the demonetisation announcement on November 8, about the inconvenience lasting 50 days. “We will wait that long and then decide whether all this pain has been worth it,” they said.

And then there were those who were all for the policy. Such as Ajay Tiwari, a wholesaler of bananas. A supporter of the ruling Bharatiya Janata Party, he was scathing in his criticism of his state’s politicians – Rashtriya Janata Dal chief Lalu Prasad and Chief Minister Nitish Kumar. But his reasons for supporting notebandi go beyond his relative affluence or his political leanings. He mentioned a doctor in his neighbourhood, who allegedly had Rs 36 crores in unaccounted wealth and died of a heart attack after the announcement. This is a comeuppance for those who misused their positions to get black money, he said, adding, “Yeh bahut achcha hua.”

Those complaining about the inconvenience, he said, did not understand. As for the shock, he asked, “How is this any different from the shock a family faces when there is an earthquake or a flood?”

We welcome your comments at letters@scroll.in.
Sponsored Content  BY 

Some of the worst decisions made in history

From the boardroom to the battlefield, bad decisions have been a recipe for disaster

On New Year’s Day, 1962, Dick Rowe, the official talent scout for Decca Records, went to office, little realising that this was to become one of the most notorious days in music history. He and producer Mike Smith had to audition bands and decide if any were good enough to be signed on to the record label. At 11:00 am, either Rowe or Smith, history is not sure who, listened a group of 4 boys who had driven for over 10 hours through a snowstorm from Liverpool, play 15 songs. After a long day spent listening to other bands, the Rowe-Smith duo signed on a local group that would be more cost effective. The band they rejected went on to become one of the greatest acts in musical history – The Beatles. However, in 1962, they were allegedly dismissed with the statement “Guitar groups are on the way out”.

Source: Wikimedia Commons
Source: Wikimedia Commons

Decca’s decision is a classic example of deciding based on biases and poor information. History is full of examples of poor decisions that have had far reaching and often disastrous consequences.

In the world of business, where decisions are usually made after much analysis, bad decisions have wiped out successful giants. Take the example of Kodak – a company that made a devastating wrong decision despite overwhelming evidence to the contrary. Everyone knows that Kodak couldn’t survive as digital photography replaced film. What is so ironic that Alanis Morissette could have sung about it, is that the digital camera was first invented by an engineer at Kodak as early as 1975. In 1981, an extensive study commissioned by Kodak showed that digital was likely to replace Kodak’s film camera business in about 10 years. Astonishingly, Kodak did not use this time to capitalise on their invention of digital cameras – rather they focused on making their film cameras even better. In 1996, they released a combined camera – the Advantix, which let users preview their shots digitally to decide which ones to print. Quite understandably, no one wanted to spend on printing when they could view, store and share photos digitally. The Advantix failed, but the company’s unwillingness to shift focus to digital technology continued. Kodak went from a 90% market share in US camera sales in 1976 to less than 10% in 2012, when it filed for bankruptcy. It sold off many of its biggest businesses and patents and is now a shell of its former self.

Source: Wikimedia Commons
Source: Wikimedia Commons

Few military blunders are as monumental as Napoleon’s decision to invade Russia. The military genius had conquered most of modern day Europe. However, Britain remained out of his grasp and so, he imposed a trade blockade against the island nation. But the Russia’s Czar Alexander I refused to comply due to its effect on Russian trade. To teach the Russians a lesson, Napolean assembled his Grand Armée – one of the largest forces to ever march on war. Estimates put it between 450,000 to 680,000 soldiers. Napoleon had been so successful because his army could live off the land i.e. forage and scavenge extensively to survive. This was successful in agriculture-rich and densely populated central Europe. The vast, barren lands of Russia were a different story altogether. The Russian army kept retreating further and further inland burning crops, cities and other resources in their wake to keep these from falling into French hands. A game of cat and mouse ensued with the French losing soldiers to disease, starvation and exhaustion. The first standoff between armies was the bloody Battle of Borodino which resulted in almost 70,000 casualties. Seven days later Napoleon marched into a Moscow that was a mere shell, burned and stripped of any supplies. No Russian delegation came to formally surrender. Faced with no provisions, diminished troops and a Russian force that refused to play by the rules, Napolean began the long retreat, back to France. His miseries hadn’t ended - his troops were attacked by fresh Russian forces and had to deal with the onset of an early winter. According to some, only 22,000 French troops made it back to France after the disastrous campaign.

Source: Wikimedia Commons
Source: Wikimedia Commons

When it comes to sports, few long time Indian cricket fans can remember the AustralAsia Cup final of 1986 without wincing. The stakes were extremely high – Pakistan had never won a major cricket tournament, the atmosphere at the Sharjah stadium was electric, the India-Pakistan rivalry at its height. Pakistan had one wicket in hand, with four runs required off one ball. And then the unthinkable happened – Chetan Sharma decided to bowl a Yorker. This is an extremely difficult ball to bowl, many of the best bowlers shy away from it especially in high pressure situations. A badly timed Yorker can morph into a full toss ball that can be easily played by the batsman. For Sharma who was then just 18 years old, this was an ambitious plan that went wrong. The ball emerged as a low full toss which Miandad smashed for a six, taking Pakistan to victory. Almost 30 years later, this ball is still the first thing Chetan Sharma is asked about when anyone meets him.

So, what leads to bad decisions? While these examples show the role of personal biases, inertia, imperfect information and overconfidence, bad advice can also lead to bad decisions. One of the worst things you can do when making an important decision is to make it on instinct or merely on someone’s suggestion, without arming yourself with the right information. That’s why Aegon Life puts the power in your hands, so you have all you need when choosing something as important as life insurance. The Aegon Life portal has enough information to help someone unfamiliar with insurance become an expert. So empower yourself with information today and avoid decisions based on bad advice. For more information on the iDecide campaign, see here.

Play

This article was produced on behalf of Aegon Life by the Scroll.in marketing team and not by the Scroll.in editorial staff.