The weakening of the rupee has been a standard feature in the post-demonetisation phase in whatever remains of the regular bilateral trade in areas close to the Indo-Bhutan, Indo-Nepal, and Indo-Myanmar borders as well. While traders in all countries have been hard hit, Nepal and Bhutan have special problems. Large reserves of old Indian currency exist in both as the Indian currency was being freely used as legal tender along with local currencies.
The Centre has already constituted an expert committee to sort out these and related problems as soon as possible. Officials are in touch with local border exchange associations. However, with few new currency notes in circulation and not many banks functioning in most areas, the level of daily trade has gone down like a cliff. The situation remains grim in the medium term since Nov 8, when demonetisation was announced in India.
To give only one example of the decline that has occurred, out of nearly 60,000 traders active on both sides of the Indo-Myanmar border in the Moreh-Tamu region, only about 7000 are still carrying on their work at a much reduced level. The revenue losses have been very high at the Petrapole-Benapore checkpost on the Indo-Bangladesh border. At this largest ‘dry land port’ of Asia, almost 70 per cent of the annual bilateral trade turnover of $4 billion is handled. Nearly 1000 trucks carrying various cargo use this terminal daily, with over 1,200 people from both countries involved in cross border financial dealings.
Now hundreds of trucks are stranded along the national highways on both sides as business has dropped to a trickle of its former volume. Unlike the currency of other countries, the Bangladesh taka was running fairly close to the Indian rupee even before the demonetization was announced, with 100 BD takas equalling Rs 80 rupees. With a nearly 20 percent fall in the rupee’s value, the tables have now been turned. In Nepal, traders and businessmen owning over Rs 50 crore in old Indian currency approached their Prime Minster Prachanda for help. The Nepalese Prime Minister(PM) in turn phoned Indian PM Narendra Modi according to media reports and received an assurance that the problems would be sorted out officially.
In contrast, local businessmen have resorted to more practical and ready-made solutions at the Indo-Bhutan border areas whether in Assam or West Bengal. The Bhutanese Ngultrum is normally much the weaker currency in comparison with the Rupee. Since Nov 8 and a virtual breakdown in trade and business, people on both sides have decided to use both currencies at par.This, as elsewhere, means Indian businessmen as well as revenue collections will register a loss.
Interestingly, the lack of a coordinated approach in India, whether at the State or Central levels, is also a major factor in the present logjam. In Assam for instance, state government authorities have been alert to the losses of the Indian traders operating out of remote areas of Kokrajhar district near the Bhutan border. They have informed the Centre and have tried to ensure that a fairer parity rate is maintained between the Indian and Bhutanese currencies.
This is not the case in West Bengal. North Bengal-based media have been reporting for days the losses incurred by the Indian side as Bhutan gets an unfair advantage in terms of present informal exchange rates, with reports received from Alipurduar and parts of Jalpaiguri. Yet, police authorities and the district administrations at Jaigaon deny any knowledge of the thriving ‘informal’ trade that hurts the local economy. Nor have they bothered to alert central government agencies!
It has been no different at the Indo-Myanmar border. In the Moreh-Tamu region, the Burmese Kyat has risen against a weaker Rupee, with Rs 100 rupees now accounting for only Kyat 800 instead of 1900 in the past.
Quite apart from substantial losses and major drops their turnover, Indian traders in most areas are no less worried about the slow response from the Central government and its long reaction time. Despite frantic appeals and reminders for help, the supply of new notes has not increased. In the Northeast, there are areas where there are no banks within 50 kilometers of small towns and villages, which are involved in bilateral trade!
At Mizoram, there are reports of people resorting to using IOUs(I owe you) to help them carry out their daily trade, whether among themselves or at the bilateral level. But such steps do help people in medical emergencies, in making costly but essential purchases or to people going on immediate journeys out of the state to other areas. In Manipur, in addition to the post-demonetisation confusion, occasional economic blockades organised by militant Nagas or other tribal groups, have exacerbated the travails faced by common people.
Nepal’s problems could have been avoided, if only Kathmandu had not agreed to an Indian request, made during Mr. Modi’s visit to the country in 2014. Nepalese authorities were not accepting Indian notes of Rs 500 and Rs 1000 denomination but were persuaded to do so after this visit, as relations improved.Now that India has scrapped these notes at short notice, Nepal naturally expects India to stand by it and help regularise all transactions so that traders and businessmen in the country do not suffer.
All in all, several weeks after November 8, complaints continue to pour in from a thousand sectors of India’s economy, from the big metros down to the remotest villages. It is far from clear whether matters will improve ‘within 50 days’, by December 30 or thereabouts, as Prime Minister Modi had announced.
Not only has the economy slowed down in almost all sectors, but the decision to demonetize, however, laudable and necessary, has implications for India’s neighbouring countries and bilateral relations as well. These are very hard times for Central policy-makers and officials, not to mention the common people. It seems everyone from the top down to the grassroots, will have to remain very, very patient indeed over the next few weeks, maybe months, even.