It is factory payday today, one of the biggest post-demonetisation challenges the centre will face since it devalued high denomination notes. The seventh of every month is fixed as the factory payday in the country. Incidentally, it coincides with the 30th day of demonetisation.
The government demonetised old ₹500 and ₹1,000 notes from November 8, 2016 invalidating 86 per cent of the value of currency in circulation. With printing and distribution of new notes moving at a speed not enough to replenish the liquidity demand in the system, there is a crunch of cash to give out to factory workers as well. Withdrawal limits have been set for commercial establishments as well and there is just not enough cash to pay factory workers in hand.
At least 46 crore workers in the country are in the unorganised sector while at least 14 crore of them are women. Most of the workers that work in factories get paid in cash and many don’t even have bank accounts.
While the process of shifting to the organised banking system may have been started because of the push from the government, it will take a long time to fully achieve its target. Till that time, the factory workers are left in a precarious situation where they have to abandon the conventional method of being paid in cash and standing in bank queues to get their salaries. But for the time being, on factory payday, the challenge is whether the government is able to supply enough cash to factories so that the employees can be paid their monthly emoluments.
In April 2015, Chief Justice of India T S Thakur, while speaking at a colloquium on workers in unorganised sector in India, said 90 per cent of the Indian labour force works in the unorganised sector. Only 10 per cent work in the organised sector where employers transfer salaries of employees electronically in bank accounts.
A report in the Hindustan Times quoted Tapan Sen, general secretary with the Centre of Indian Trade Unions, affiliated to the Communist Party of India (Marxists) saying: “We are getting calls from many places where factories and construction companies have not paid their workers. We fear non-payment can lead to a volatile situation.”
While it is understood that the government is reaching out to factory employers to spread awareness about digital economy and cashless transactions, the started attempts to spread awareness alone will not pay the salaries right now. Factory owners should have started with the process to get their employees’ bank accounts made, at least after the demonetisation was announced.
However, it is also true that banks are overworked and overburdened right now and making new bank accounts is a process which will take a long time. It is expected that the government will have a plan of action to counter the cash shortage. If not, they are going to leave crores of people miffed on the one-month anniversary of their most radical reform since coming to power.