Cash crunch may lead to job crisis
India seems to be staring at massive joblessness after demonetisation of Rs 500 and Rs 1000 as industrial associations are now coming out with the fear of shutdown which has already happened in some parts of the country leading to unemployment particularly in micro, small and medium enterprises (MSME).
In the words of Prime Minister Narendra Modi, the cities have the capacity to digest poverty but the poor people working as daily wage labourers have already started leaving the cities due to the absence of jobs caused by lack of liquidity in the market which is being created by the slow rate of replacement of new currency.
“These notes constituted 85 percent liquidity in the market which was sucked out of it immediately. Besides, the entrepreneurs running MSME units in the country neither have money to purchase raw materials for their units nor to pay wages to the labourers. It would have been better if the replacement of the currency would have been done over the period of a few weeks but the slow process is leading us to shut down,” said Anil Bhardwaj, Secretary General of Federation of Indian MSME adding demonetisation per se is not the issue but slow replacement definitely is.
He also gives several examples where entrepreneurs have no option but to purchase raw material for the industry on cash and are forced to shut down.
For instance, Bhardwaj said, scissors manufacturing units in Meerut purchase scrap from kabadiwalas (scrap dealers and vendors) as raw material. “They are poor people and survive on daily earnings. They don’t accept payment by cheque, draft for any other medium but cash,” explained Bhardwaj.
He also narrated the hardships being faced by paper mills in Muzaffar Nagar which are being shut down one by one. “These paper mills purchase the waste byproducts of sugarcane as raw material and pay the farmers in cash. In absence of cash several of them are shut down and around 25,000 workers have been rendered unemployed,” informed Bhardwaj.
“The bangles in Firozabad are made from the broken bottles and glass collected by scrap vendors and are now forced to shut down their units leading to unemployment,” he added. Similarly, the bass, cotton, and other MSME industries besides unorganized sector are staring at imminent shutdowns in National Capital Regions (NCR) of Uttar Pradesh, Haryana and Rajasthan.
In Kolkata, the leather industry purchases hide of animals from farmers and hide traders who also accept payment in cash. “Even the big industries purchase hide on cash,” said Bhardwaj estimating huge unemployment in Kolkata and West Bengal as the industries like Jute, Cotton and silk purchase their raw material from farmers and small traders on cash. The share of MSME in the GDP of the country is around 17 percent and provides employment to 10 crore people.
“Business can’t wait for long. There has been almost no business since November 9 after the announcement of demonetisation. The daily wage labourers are suffering the most. The business class has more capacity to absorb the shock but it too, has a limit,” said Praveen Khandelwal, Secretary General of Confederation of All India Traders (CAIT). “If the problem lingers for long, we will have no option but to go for job layoff,” he added.
However, big industrial associations like FICCI, ASSOCHAM, and PHD Chambers refused to comment on the issue. In a report, foreign think tank HSBC has predicted a decrease of 1 per cent in GDP while Ambit Capital has predicted a decrease of only 0.5 per cent in the GDP. Rajender Sharma, a trader in Azadpur Fruit and Vegetable Market in Delhi said that the farmers and labourers are suffering the most.
“Farmers are not getting full value for their produce but are bound to sell it at low prices as the items are perishable. The traders give them a fraction of the money and ask to come again for remaining. Several labourers have left the market for their villages in the absence of work,” said Sharma.
In Delhi, the labourers and artisans are also facing unemployment as the construction and infrastructure development have almost stopped in the city. “We need to conduct a study on exact loss of jobs as we can’t predict anything without data,” said a senior official of FICCI.