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Caught unaware by the sudden announcement of withdrawal of Rs 500, Rs 1000 currency notes, the trading community in the country’s financial capital saw frantic efforts being made to convert the now invalid currency notes by cutting barter deals with some agents. Sources said that the trend was most visible in cash-driven gold, diamond, steel, pharmaceutical, imitation jewellery and garments trade. Within hours of the Prime Minister announcing scrapping of the high-value currency notes, sources confirmed that private exchanges offering barter offers at a price had gotten active.
Offers being made was exchange of the high currency notes for lower denomination notes (Rs 100 and below) of a lower value, or swapping of the currency notes for gold bars or gems and diamonds, and foreign currency. Sources said private exchanges were mainly being run by jewellery merchants with a high declared turnover. A real estate magnate was also offering the serving, sources claimed.
Meanwhile, business among the trading community remained sluggish all day. Viren Shah of the Federation of Retail Traders Welfare Associated summed up the mood in the community. “People are in a state of shock. They are scared and depressed. The business was down by almost 80-90 per cent Wednesday since the customers were busy converting high valued currency notes. Markets were empty, and so were the roads. The buying sentiment was just missing among customers today,” he said, adding, “We feel the scenario will exist for ten days till normalcy returned.”
Jitendra Shah, President, Metal and Stainless Steel Merchant’s Association (MASSMA), echoed Viren’s viewpoint. “There is panic all across. While the government’s decision is welcome, we feel that government should have given people some time for contingency arrangements before implementing it,” he said.
He added: “While the steel industry saw almost no business Tuesday, there is also concern about salary and daily wages to be made to some of our employees, who are often paid in cash. Some of them do not even hold bank accounts.” The steel industry has about 5,000 registered traders, whose collective annual turnover is estimated to be to the tune of Rs 50,000 crore.
Viren Shah said the trading community would get around the problem in a few days. “People of India have taken the decision on a positive note. And the trading community is not an exception,” he said.
But not everyone was equally optimistic. Requesting anonymity, a steel merchant said, “The BJP government came to power riding on the wholehearted support from the trading community. But there have been no Acche Din (good days) for us so far.”
Sources said that medium-level real estate developers were also among the worst hit. Black money transactions are commonplace in the construction business. A developer pointed out that even first time buyers looking to purchase a property would have to cough up some more money in stamp duty and registration fee, since the onus now would be on executing a deal for the actual amount of the transaction. In Mumbai especially, there is a tendency among buyers and sellers to execute deals at government determined ready reckoner rates to lower stamp duty payments. But private housing activists said that one could not sympathise with either the developers or such flat buyers. “They were evading tax payments after all,” said one of them.
The crackdown on black money would also impact the age-old Angadias, the unofficial courier-cum-banking service providers. The Angadias act as conduit to transfer money and jewels, mainly among traders. “There would be about 50,000 such Angadias operating in the country. Since traders won’t have enough cash to generate work for six months, we won’t have much business till then,” said one operator. “We work on mutual trust basis. There are no written deeds or understandings,” said another.
In Mumbai alone, the Angadias are estimated to transport cash, valued items worth Rs 1,200-Rs 1,500 crore daily. The diamond and the gold industry, whose traders were complaining Tuesday, use this network excessively. Many of the Angadias are yet to resume official business post Diwali. “There is no problem in disclosing the amounts reflected in our book of amounts. But what do we do with amounts that cannot be disclosed,” said another operator.