Down one of the hundreds of dusty lanes that make up Gandhi Nagar market in India, Delhi’s largest textile bazaar, the small factory where Neeraj Sharma produces girls’ jeans is quiet.
“Normally you couldn’t walk in here,” he said, ambling across the concrete shop floor, past dormant sowing machines and piles of unfinished denim.
Sharma estimates about 80 percent of his workforce have left Delhi for their villages in the past month.
Photo: EPA
“It’s good that they left,” he said. “Because of this demonetization problem, there’s no work for us either.”
India’s vast informal economy has been reeling since Nov. 8, the morning after Indian Prime Minister Narendra Modi announced the sudden voiding of the country’s two most-used cash bills.
It is the largest-scale financial experiment in Indian history: gutting 14 trillion rupees (US$67.88 million) — 86 percent of the currency in circulation — from the most cash-dependent major economy in the world.
More than a month on, India’s Reserve Bank has issued about 1.7 billion new notes, with less than one-third the value of what was removed. The sixth-largest economy in the world is running on 60 percent less currency than before. Lines outside banks continue to stretch, and India’s small business lobby said its members are facing an “apocalypse.”
However, Modi insists he is not finished.
Initially intended to flush out the “black money” said to be hoarded by elites and criminals, the Indian government now frames demonetization as the first step in a “cashless” revolution to shift the billions of transactions undertaken each day in India online — and onto the radar of tax authorities.
This week, Indian Minister of Labour and Employment Bandaru Dattatreya announced it would soon be mandatory for employers to pay their staff into bank accounts, a hugely ambitious step in a country where as many as 90 percent of workers are paid in cash.
Already struggling, business owners such as Sharma are dreading the prospect of more enforced digital migration.
“How do you think I can pay the workers with a check if they don’t have a bank account?” he said, in a tiny office thick with incense smoke. “And it takes three days to clear a check. What will they eat during those days?”
His reasons are not just altruistic. Apart from potentially raising his tax bill — in a country where just 1 percent pay income tax — paying salaries electronically would mean giving staff Delhi’s mandated minimum wage, 9,724 rupees per month for unskilled workers.
“Right now no one pays the minimum wage that the government decides,” Sharma said. “It will only make things expensive: we will charge the customer.”
Outside his workers’ earshot, he adds: “If someone is doing the work for 2,000 rupees, why should we pay them 15,000 rupees?”
However, workers too are wary of the big push online. Tens of millions of Indians have been given zero-deposit bank accounts in the past two years under a government scheme to boost financial inclusion, but even after demonetization prompted a rush of new deposits, 23 percent of the accounts are still empty.
Asha Devi sits spread-legged on the Sharma factory’s floor, using fine scissors to cut loose threads from piles of jeans. A migrant worker from Bihar State, she has a bank account, but has not been able to access her money since early last month.
“I’ve been standing in [bank] queues from 7am until 5:30 in the evening,” she said. “I still cannot withdraw money, and I lose a day of work each time.”
The experience has heightened her skepticism about being paid online.
“I am a daily wage worker and I’m not sure if I’ll have a job tomorrow,” she said. “If I get [the cash] in hand, I know I have the money.”
Cash has a cold, hard certainty that still matters to itinerant workers.
“There are many factory owners who will make these daily wage workers into fools,” Devi adds. “They’ll tell them they have deposited the money when they haven’t.”
“In theory, it’s a great idea to actually ensure that workers actually get the wage they’ve been promised,” said Indian Federation of Trade Unions president Aparna, who like many Indians uses only one name.
“The downside is: We can’t do it. It’s a bit like say the government has announced the end to all poverty by tomorrow. It’s not taking into account any of the obvious constraints that even a child in India could see.”
About one in three Indians still do not have bank accounts, she said, many of them put off by the need to navigate banking bureaucracy.
“For people who don’t have matching identity cards — say, if somebody made a mistake typing their name — then it’s a nightmare,” she said.
Nagendra Sarkar, another of Sharma’s employees, has been trying to open an account in Delhi, but keeps running into an obstacle: He has no fixed address.
“The bank people are asking for papers to prove that it’s my account,” he said.
It is one of many points at which the digital salary plan, and the entire “cashless” vision, butt up against the stubborn reality of Indian working life.
“Take an example of rickshaw puller who transfers goods from my shop to the factories,” said Pyarlal, a lace factory owner in Gandhi Nagar. “For one trip I pay him 100 rupees. Does the government expect me to give him a check? I mean, how do I pay him?”
Such a major reform, even one that might benefit workers, cannot be enforced overnight, Aparna said.
“You have to do it gradually, let the system be put in place, create the infrastructure first,” she added.
Mihir Sharma, a senior fellow at the Delhi-based Observer Research Foundation, agrees.
“The law might well be passed,” he said. “But it would likely be widely ignored, which is the fare of most labor regulation in India.”
Digital payments might be novel, but the ambitious plan is “an old Indian pathology,” he said. “The belief that if you legislate something, it happens.”
HORMUZ ISSUE: The US president said he expected crude prices to drop at the end of the war, which he called a ‘minor excursion’ that could continue ‘for a little while’ The United Arab Emirates (UAE) and Kuwait started reducing oil production, as the near-closure of the crucial Strait of Hormuz ripples through energy markets and affects global supply. Abu Dhabi National Oil Co (ADNOC) is “managing offshore production levels to address storage requirements,” the company said in a statement, without giving details. Kuwait Petroleum Corp said it was lowering production at its oil fields and refineries after “Iranian threats against safe passage of ships through the Strait of Hormuz.” The war in the Middle East has all but closed Hormuz, the narrow waterway linking the Persian Gulf to the open seas,
Taiwan has enough crude oil reserves for more than 100 days and sufficient natural gas reserves for more than 11 days, both above the regulatory safety requirement, Minister of Economic Affairs Kung Ming-hsin (龔明鑫) said yesterday, adding that the government would prioritize domestic price stability as conflicts in the Middle East continue. Overall, energy supply for this month is secure, and the government is continuing efforts to ensure sufficient supply for next month, Kung told reporters after meeting with representatives from business groups at the ministry in Taipei. The ministry has been holding daily cross-ministry meetings at the Executive Yuan to ensure
RATIONING: The proposal would give the Trump administration ample leverage to negotiate investments in the US as it decides how many chips to give each country US officials are debating a new regulatory framework for exporting artificial intelligence (AI) chips and are considering requiring foreign nations to invest in US AI data centers or security guarantees as a condition for granting exports of 200,000 chips or more, according to a document seen by Reuters. The rules are not yet final and could change. They would be the first attempt to regulate the flow of AI chips to US allies and partners since US President Donald Trump’s administration said it rescinded its predecessor’s so-called AI diffusion rules. Those rules sought to keep a significant amount of AI
A new worry has been rippling across the stock market lately: Entire businesses, not just their employees, might be thrown out of work. While most economists say fears of an artificial intelligence (AI) job apocalypse are overblown, seismic shifts have happened in the past after big tech breakthroughs. The IT revolution of the 1990s led to a surge in productivity that sped up the US economy for several years. It also rendered companies or even industries largely redundant — from travel agents and stockbrokers to classified advertising and newspapers, or video rental stores. Economists expect AI would deliver higher productivity,
RSS