An incident in 2000, during my initial years of work, woke me up to an uncomfortable question about post-economic liberalisation India. I was at a meeting with waste-pickers at Digha in Patna and a woman told me of her troubles with a Rs 500 note. She had saved money and changed it into a Rs 500 note, wrapped it in plastic and hid it in the mud beneath her hut. That was the safest place, she felt. Unfortunately, she could not locate the exact place where she had buried the note. She cried as she told me how every day, she dug a portion of her hut, in the hope of locating the money.
For the poor, in whose name financial reform has been conducted since Independence, there has been no relief. They still save their hard-earned money in dubious instruments. The much-touted Jan Dhan Yojna did bring them closer to banks, temporarily, but banks being what they are, continue to repel the poor as they never consider them “bankable”, despite the rhetoric and occasional sympathy. Rebuked by formal financial institutions, those in the unorganised sector rely on moneylenders and wholesalers, not just for credit but also to secure their savings. In this patronage mechanism where the exploiter is perceived as the saviour — providing loans for working capital, meeting expenses during health crises and even for weddings — it is the moneylender who is with the poor. In urban centres, if they have to save beyond this, it is in dubious methods like chit funds and Ponzi schemes.
Ever since the announcement of demonetisation, the income of unorganised sector workers has come down drastically — by up to 60 per cent. And their work is decreasing each day. It is hurting all the more as their “debit and credit limit” with their patrons has been crossed.
With the dwindling number of customers and work, the resources at hand are shrinking. The transactions of the poor with financial intermediaries — whether moneylenders or micro-finance institutions — have come to a standstill. Journalists are scanning cities for vendors who use electronic devices to get payments, but rarely find them .
Thus, while one vicious financial cycle has been broken, there does not appear to be another system which can provide the poor and the unorganised with mainstream credit and savings facilities. Will banks give them credit? The much-hyped Mudra loan has reached very few despite the best efforts. The branch managers, at the time of opening accounts, warn people not to come for a loan. The Recognition of Prior Learning (RPL) programme of the Skill India Mission suffers mostly because of the difficulties with Aadhar-linked bank accounts. It is disheartening, but the fact remains that when people go to deposit small amounts with a lot of small denominations in the banks, they are disparaged and discouraged. So where do they deposit their money? Accepting money through electronic devices is a good idea. But can everyone do that? Some smart street vendors in big cities perhaps can, but what about the entire unorganised sector? Are banks willing to take the risk associated with electronic payments with unorganised workers who are largely uneducated?
A corrupt system affects the poor the most. Take the case of a street vendor. He pays bribes to the police, municipal staff, local mafia, large shopkeepers — all in cash. Demonetisation has not stopped such bribery. He gets goods from wholesalers on credit or pays in cash.
At some places, the mafia has brought in touts who are exchanging the Rs 500 and Rs1,000 notes for vendors against a five per cent commission. Will demonetisation stop this exploitation and extortion?
An informal credit and debit mechanism has been demolished. Without adequate cash in the system, it is less likely to be restored soon.
Many are being forced to use the bank. However, for the pains of demonetisation to bring any substantive change in the lives of the poor and the unorganised, formal financial institutions have to rise to the occasion. Merely paying lip-service to unorganised workers is not enough. They must be given substantial services including credit, savings, electronic receipt of payment etc. Banks must be considerate and make sure unorganised workers are bank-worthy. Without these steps, the poor will become more vulnerable than before.
(This article first appeared in the print edition under the headline ‘The Street Vendor’s View’)