Cashless in the village: A view from rural Northeast India

Cashless in the village: A view from rural Northeast India

Demonetisation’s impact is more serious in a region where two-thirds of the population has no bank accounts.

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The Ngultrum and the rupee were typically exchanged at 1:1. But since November 8, you have to pay up to Rs 120-130 for 100 Ngultrum.

In Lower Assam’s Kokrajhar district, from where I write, using the new Rs 2,000 denomination note is a greater challenge than procuring it. A colleague, fed up carrying his note for over a week, managed to persuade a girl in his village to part with Rs 100 notes that she had. The exchange was, however, conditional upon his using three out of those 20 precious notes to buy her a chicken (I was relatively fortunate lucking out at a kirana store in Bongaigaon, about 40 km from Kokrajhar, and hence spared from poultry trading).

The Narendra Modi government’s scheme of demonetising Rs 500 and Rs 1,000 currency notes, unveiled on November 8, has had many stated objectives — starting with launching a “surgical strike” on black money and terror financing, to enabling the move to a cashless/less cash economy. While to what extent these objectives have been met is unclear so far, it might be valuable, though, to examine its impact from a part of the country that’s often ignored when it comes to national policymaking: rural Northeast India.

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It is rural areas that have clearly borne the brunt of demonetisation, since transactions here take place almost exclusively in cash and bank accounts, too, are fewer. There’s enough countrywide documentation in this regard by now — of small vegetable farmers having to dump produce at distress prices, daily wage labourers and tea garden workers going unpaid, or the cattle and poultry trades getting seriously hit because of cash suddenly disappearing from the system.

In rural Lower Assam, ATMs were shut for a good week after the demonetisation announcement. Two-thirds of people in the Northeast don’t even have bank accounts. It meant that the ones queuing up before banks were mainly those waiting to exchange their now-useless notes. The long lines continue — in small rural branches that just cannot handle such large crowds.


The problem, however, isn’t only about lack of access to cash, but what happens when one actually gets it. I’ve seen people standing from 4 AM and finally being rewarded with a new Rs 2,000 note at 1 PM, but continuing to borrow money from relatives and neighbours or simply cutting back on consumption. This is because the Rs 2,000 notes are impossible to use, as smaller notes returnable as change are scarce. Right now, it is paddy harvesting season here, and agricultural labourers are being forced to take wages in kind — basically, a share of the harvested crop — since there isn’t enough cash with farmers to pay them.

In the border villages of Kokrajhar and Chirang districts, it wasn’t rare even earlier to see the Bhutanese currency in circulation with the rupee. The Ngultrum and the rupee were typically exchanged at a 1:1 ratio. But since demonetisation, you have to pay up to Rs 120-130 to be able to exchange 100 Bhutanese Ngultrum. The shops and traders enabling this — unofficially, of course — know well today that the old Indian Rs 500 and Rs 1,000 notes are worthless and will increasingly be so, as the December 31 deadline for depositing these in banks approaches.

From my vantage point here, the move to a cashless economy — through sudden withdrawal of currency from circulation and expecting the adjustments to automatically materialise — seems a faraway dream. Yes, there may be strong, valid reasons to go cashless (bringing about efficiency and transparency in transactions, easier detection of corruption, among others). But there are, equally, robust counter-arguments as well (concerns of privacy and data storage, benefits going to a few mobile wallet or payment solutions companies, etc). What is striking is that there has been no attempt from the government to engage with these diverse opinions. People have, instead, been told to simply go cashless without questions being asked. One cannot also ignore the fact that moving to a cashless economy, especially in rural areas, involves enormous investments by the government, both in infrastructure and in spreading awareness.

The other argument being made about demonetisation is that it has brought out a sense of everyone being part of a great national project — a moral positioning of honest and ordinary folk against the corrupt and the powerful. It has also shown how social capital can help mitigate even the harshest blows from the sudden disappearance of cash. There is this revealing case of a village in Mizoram that has chosen to temporarily replace Indian currency with ‘I owe you’ papers — issued on trust and to be redeemed only when cash is plentiful again.

But for each such inspiring story are also tales that can add to the sense of alienation and marginalisation often felt by the people of the Northeast. There are reports coming in, for instance, of black money generated in other parts of the country — and held in the now-outlawed notes — being laundered through the region’s tax-exempt tribal citizens. The Finance Commissioner in Arunachal Pradesh has even issued an official warning against such post-demonetisation innovations.

The point of policy is not only to invoke a collective conscience — Justice Dipak Misra may well disagree — but to be effective. That would require any policy to be justified in monetary and economic terms, while taking both costs and benefits into account before implementation. Given the manner in which it has been implemented, it’s unclear what the demonetisation policy was meant to achieve, and what it actually will. The uncertainty is further amplified in areas like the one I am now in.