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Demonetisation

#Demonetisation: Farm to loom, textiles totter

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Mumbai, Bhiwandi & Ahmedabad: Since the turn of the century, Bhiwandi — once called the Manchester of Asia — has wilted against competition from Bangladesh and Vietnam. Bhiwandi holds more than a sixth of India’s 6.5 million power looms — machines that manufacture fabric from yarn.

A congested city of about 1.5 million, 30 km north of Mumbai, it was once a key link in India’s cotton economy, which employs 25 million workers alone, the second-largest employer after agriculture.

The Indian textile industry is already challenged by falling exports, low productivity and rising prices. Bhiwandi has now been further crippled by the aftermath of the November 8, 2016, scrapping of 86 per cent of bank notes, by value.

Notebandi ne humko paanch saal peeche fek diya(demonetisation threw us five years behind),” said Asad Farooqi, 65, who has been running more than 100 power looms for about 30 years.

In this industry where son tends to follow father, Asad’s son, Aftab, 34, remembered how they lived in prosperity in his childhood, and that earning Rs 20,000 for a consignment was very normal.

“Last month, we earned Rs 17,000 from all our looms business,” Aftab said, with a wry smile. The Rs 20,000 of 1996-97 would translate to about Rs 70,000 today, after factoring in an average inflation of 6.5.

The textile industry, of which decentralised power looms and knitting are the largest components, contributes 2 per cent to India’s gross domestic product. Maharashtra, with more than 1.1 million power looms, is one of India’s largest power loom hubs, providing direct employment to a million people in Bhiwandi, Malegaon, Dhule, Sangli and Sholapur.

Only 20 percent of these (Bhiwandi’s looms) are running today,” said Mannan Siddiqui, President, Bhiwandi Textile Mills Association, who has spearheaded the attempt to revive Bhiwandi’s looms over more than 20 years.

Malegaon, 270 km to Mumbai’s northeast, is similarly struggling to keep looms running.

Bhiwandi is one of the key links in India’s textile supply chain — from farm to loom. Although there are no consolidated data, we found production cuts, job losses and revenue declines in an already struggling sector.

Cash rules critical parts of this supply chain: from farmer to yarn factory to yarn trader to power loom cloth manufacturer to wholesaler to retailer to consumer. Dyers, zip-and-button fixers and daily workers who lift bales are some of the poorest in this chain and they appear to be the worst hit.

Textiles were the largest creator of Indian formal-sector jobs, with 499,000 added over the last three years. There is strong international evidence that exports help create additional jobs and push up wage and income growth.

In Mangaldas market, the biggest textile market in Mumbai — a city once known for its textile mills and labour unions, both now relics of history – N. Chandrakant said business was 20 percent less than normal for the winter-and-wedding-shopping season, which runs from November to February. There was no business in the first week of notebandi.

“Customers are buying simple, plain shirt material, and demand for luxury items has reduced,” said Chandrakant. “People are being economical.”

Kripesh Bhayani, a cloth-and-apparel retailer in the same market, is also a garment maker who runs 17 imported fabric-weaving machines in a Mumbai suburb. He said manufacturing was unaffected, but finishing of garments — such as fixing buttons and zips — had suffered. Bhayani outsources these jobs to household industries, which work on cash.

While the demand for garments has dropped 30 per cent, wholesale demand has dropped 50 per cent, merchants told us.

“Our market remains crowded the entire day during the November-to-February season,” said Bharat Thakkar, Secretary, Mangaldas Market Cloth Merchants Association. “Sellers struggle to attend to the flurry of customers. The relatively empty shops today tell you everything.”

At Ahmedabad’s New Cloth Market, trade had fallen by 80 per cent, according Rajesh Agarwal, Secretary of the market association. He explained why 60 of his 80 embroidery workers had returned to their villages after notebandi: When sales dropped, his cash dried up, so he could not pay salaries. Workers, said Agarwal, preferred to go temporarily jobless than endure the hassle of opening accounts in already stressed banks.

“Slowing consumer spending has resulted in a slowdown in domestic demand for apparel and other end-products of textile industry in the immediate term as a fallout of demonetisation,” The Financial Express reported onDecember 3.

As a result, retailers cancelled their cloth orders from wholesale traders.

Wholesaler Sudhir Parekh explained how a boom at the start of November — when Diwali shopping season gives way to the winter-and-wedding-shopping season — collapsed afterNovember 8.

Cashless does not work there.


“A lot of inventory that would have been sold by now is stockpiled at my shop,” said Parekh, who works from Mumbai’s Mulji Jetha wholesale cloth market. “My cloth, which is my working capital, is lying here, and there is no way I can purchase more from the textile mills. I am stuck.”

This part of the textile supply chain is all cash: Consumers pay cash to retailers, who pay cash to wholesalers because it is convenient. Wholesalers, who place large orders with textile mills and pay through cheques or bank transfers, are not currently doing that because of the shortage of cash, driven by the drying up of retail spending.

Parekh said he was ready to go cashless, but his ability to do so depended on retailers and customers to do so.

Cashless transactions, however, dominate the large-volume purchases of cloth that traders make from textile mills in Bhiwandi, Surat, Ahmedabad, Tirupur and Coimbatore.

In Bhiwandi, Suleiman Rahil and Syed Nasar Ali, both in their 40s, were doing nothing when we met them. Both are loom workers who run five to six power looms, in whichever factory needs them. Both are from Pratapgarh district in Uttar Pradesh, and have five children each.

Rahil and Ali each earned Rs 15,000 a month beforenotebandi, they said. Their incomes are down by a third to about Rs 5,000 each, there is no work most days, and they spend their day looking for odd jobs, including in farms and other markets.

“How can a family with six children sustain itself on Rs 5,000 a month?” Ali asked.

Bhiwandi labour contractor Ashok Ahuja — who also owns about 60 struggling power looms — explained how half his workers, from various rural districts of Uttar Pradesh, Bihar, Jharkhand and West Bengal, left for their villages when work dried up.

Some have started returning. Ahuja restarted his looms in Bhiwandi on January 2, two months after he shut them down, right after wholesalers cancelled orders after demonetisation.

In Bhiwandi, Siddiqui argued that China, Pakistan and Bangladesh’s policies have benefited their textile industry, while India’s have enfeebled power loom owners like him, who must deal with not just low demand but daily price variations of yarn — the chief raw material for power looms — over the last four years.

The cost of yarn — which he buys from Mumbai — varies intra-day, “like the stock market”, said Siddiqui, as yarn traders increase or reduce the price according to daily demand.

On December 20, the yarn was selling at Rs 156 per kg. On January 4 the rate had shot up to Rs 178. When Siddiqui finally bought his yarn, it was Rs 200 per kg. “About 10 kg of yarn is enough to produce 100 metres of gray fabric, which typically sells at Rs 30 per metre,” said Siddiqui.

A 100-metre swathe of cloth fetched him Rs 3,000, of which Rs 2,000 went into buying yarn the day we visited. With the Rs 1,000 left, Siddiqui had to pay for workers, electricity and machine maintenance.

While the manufacture of yarn, the chief raw material in making cotton fabric, has largely been unaffected, the same cannot be said of ginning facilities in the same mills, where cleaned, seed-free cotton is obtained from raw, impure cotton. The slowdown between November and January was because cotton farmers were not accepting cashless payments.

“About 30 vehicles with cotton come to our mill every day,” said Mukesh Patel, who runs the ginning facility at Pashupati Mills. “On January 6, we had only five vehicles coming to sell cotton. The highest number we have seen after demonetisation is 15.”

“Farmers accept only cash as they have to pay their farm labour in cash,” said Patel. “Cashless does not work there.

By Abhishek Waghmare

Demonetisation

Fake 2,000-rupee note was out within 53 days of demonetisation!

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By Rajnish Singh 

New Delhi, Dec 7 : It didn’t take long for fake notes of 2,000 rupees to start circulating after Prime Minister Narendra Modi announced demonetisation in November 2016, with one of its stated aims being to kill counterfeit currency, official data show.

According to the National Crime Records Bureau’s (NCRB) latest report released on November 30, a total of 2,272 fake notes of Rs 2,000 denomination were seized in 2016. Since the Rs 2,000 note — along with the new Rs 500 currency — was introduced only after November 8, 2016, it means that those counterfeiting the notes got into the act very quickly.

In just 53 days between November 8 and December 31 last year, police and other government agencies seized 2,272 fake Rs 2,000 notes — at a time when people across the country were struggling to get hold of the new currency.

The maximum number of these Rs 2,000 fake notes were seized in Gujarat (1,300), followed by Punjab (548), Karnataka (254), Telangana (114), Maharashtra (27), Madhya Pradesh (8), Rajasthan (6) and Andhra Pradesh, Arunachal Pradesh and Haryana (3 each). Jammu and Kashmir and Kerala accounted for two fake notes each. One such note was seized in Manipur as well as in Odisha.

The Rs 2,000 notes were part of the 281,839 fake notes of various denominations recovered from different locations across India.

When Modi announced the note ban, he said it was being done to end black money, counter terror financing and do away with counterfeit currency.

Among other fakes, 82,494 notes of Rs 1,000 and 132,227 of Rs 500 denomination were also seized last year along with 59,713 notes of Rs 100 and 2,137 notes of Rs 50, said the annual publication of NCRB released by Union Home Minister Rajnath Singh.

In a number of raids across the country, police forces, the Income Tax department and other government agencies also recovered 184 fake notes of Rs 20, at least 615 notes and coins of Rs 10 and 2,001 notes of Rs 5.

Also seized were 196 fake coins of Rupee 1 denomination — between January to December 31 last year.

According to the data, the face value of the total fake notes found in 2016 is Rs 101,222,821.

In terms of value of maximum fake notes, Delhi (Rs 56,521,460) topped the list.

The national capital was followed by Gujarat (Rs 23,724,050), West Bengal (Rs 23,295,800), Andhra Pradesh (Rs 9,280,000), Karnataka (Rs 8,009,136), Telangana (Rs 7,600,905), Uttar Pradesh (Rs 5,013,700), Maharashtra (Rs 4,799,700), Punjab (Rs 4,239,750), Bihar (Rs 3,736,800), Tamil Nadu (Rs 3,342,540), Kerala (Rs 2,057,200), Madhya Pradesh (Rs 1,626,890), Chandigarh (Rs 1,499,000), Rajasthan (1,035,100), Assam (Rs 800,050), Jharkhand (Rs 706,000) and Uttarakhand (Rs 666,400).

At 114,751, Delhi also topped the chart in terms of maximum seizure of fake notes, followed by Gujarat (39,725), West Bengal (32,869), Andhra Pradesh (14,541), Karnataka (14,228) and Telangana (12,667).

Among all the states and union territories, Goa accounted for just 21 fake notes having a face value of Rs 17,000.

No fake note was recovered from Chhattisgarh, Sikkim, Andaman and Nicobar Islands, Dadra and Nagar Haveli, Daman and Diu as well as Lakshadweep, the NCRB data says.

The data said a total of 1,172 FIRs were registered and 1,107 people arrested for their involvement in the illegal trade.

IANS

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Demonetisation

Demonetisation a ‘magical’ scheme that turned black into white: Rahul Gandhi

Modi had on November 8 last year announced the demonetisation of Rs 500 and Rs 1,000 currency notes.

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RAHUL-GANDHI

Dahod (Guajrat), Nov 25 : Congress Vice President Rahul Gandhi on Saturday said that demonetisation was a “magical” scheme by Prime Minister Narendra Modi that turned all the black money into white.

Addressing the “Adivasi Adhikar Sabha” (Meeting for tribal rights) in this Gujarat district, he said that while the common man stood in long bank queues for days, the rich got their old currency exchanged through the backdoor.

“There is another magic by Modiji and it is demonetisation. You all stood in bank queues, but did you see any suited-booted gentleman standing in the queue? You did not, and I will tell you why,” Gandhi said.

“It is because all the suited-booted guys entered the banks from the back door, sat in air-conditioned rooms and got their lakhs and crores exchanged. All the thieves thus got their black money converted into white through magic,” he said.

Modi had on November 8 last year announced the demonetisation of Rs 500 and Rs 1,000 currency notes.

Gandhi also attacked Modi over not fulfilling the promises he made to the tribal people.

“Modiji did not give a penny to the tribals, but he granted your land, which you call mother, worth Rs 33,000 crore to Tata’s Nano project. But the interesting thing is that I do not see any Nano cars on the roads in Gujarat or elsewhere,” he said.

Gandhi emphasised that the Congress-led United Progressive Alliance (UPA) governemnt had allocated Rs 35,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Scheme that provided sustenance to millions across the country.

“And here, Modiji gave this much amount to just one industrialist in one single state. Be it land, be it electricity or be it Narmada’s water, everything is being given to just 5-10 select people,” he said.

Earlier in the day, Gandhi visited residences of Congress Rajya Sabha MP Madhusudan Mistry who has lost his son and that of former MP and AICC Secretary Mirza Irshad Baig who passed away recently, to convey his condolences.

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Demonetisation

Interview Niti Aayog’s Bibek Debroy: Demonetisation was for institutional cleansing

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Bibek Debroy
Bibek Debroy during an interview with IANS in New Delhi. (Photo: Bidesh Manna/IANS)

New Delhi, Nov 9: NITI Ayog member Bibek Debroy admits that demonetisation was a temporary shock on growth but asserts that the economy has now climbed back. One year into the disruptive note ban, Prime Minister Narendra Modi’s economic policy adviser says the worst is over and there are signs that things are improving now.

He also says demonetisation should not be seen through a narrow cost-benefit calculus but as a move aimed at “institutional cleansing”.

“Yes, there has been a dip, but followed by a climb back. If you look at the data, there has been a slowdown in the growth rate continuously. I have not seen any data, even remotely statistical, which suggests that demonetisation has led to a more than temporary shock in terms of growth or employment,” Debroy, who heads the Economic Advisory Council revived recently by the Prime Minister, told IANS in an interview.

Debroy said demonetisation should not be looked at only from an economic perspective.

“If I evaluate it with a narrow economic cost-benefit calculus, I think that would be unfair, because the intention (behind the move) was not narrow economics,” Debroy said. The decision was aimed at institutional cleansing. “How do I even quantify and measure it?”

“If I look at it only with that economic lens, I will evaluate the costs and the benefits in a certain way. If I look at it with a political-economic kind of lens of cleansing up the system, I will evaluate it in a slightly different way.”

Debroy said that purely in terms of economics, one will not have to wait too long as some data, like that of direct tax collections, would come out soon which would reflect demonetisation and help understand its implications.

There was “excessively high” prevalence of cash in the system till last year and cash-to-GDP ratio has now sharply declined by almost one-third post-demonetisation, he said.

Debroy said that before demonetisation, the cash-to-GDP ratio in India was almost 13 per cent. “That’s excessive. It has now come down to a little over nine per cent,” Debroy noted.

“A lot of the cash in India was excessive and was not yielding returns to the person who held the cash, nor was it performing the role that money performs as a multiplier.”

“I’m not comparing with developed countries but even if you compare with other countries in South Asia, India had too much cash,” he said.

As per estimates, the cash-to-GDP ratio was 5.8 per cent in Bangladesh, 3.5 per cent in Sri Lanka and 9.3 per cent in Pakistan in 2015, whereas in India it was 13 per cent.

“That excessive cash has now vanished. The money has now come into the banking system. But that does not necessarily legitimise that money. You have to subject yourself to further scrutiny,” Debroy said.

Debroy has come out with a compilation, “On the Trail of the Black”, along with his colleague Kishore Arun Desai, with contributions from several writers tracing the prevalence of corruption and evaluating its impact on society and the economy.

He admitted that every decision related to the demonetisation exercise might not have been perfect.

“But we know that with the benefit of hindsight…. and this kind of thing had never been attempted before,” he said.

Read more…Bollywood’s organised sections escaped impact, but daily wagers suffered

He said the biggest challenge in implementing the demonetisation decision was to maintain the surprise element which was crucial.

Kishore Arun Desai, who edited the book along with Debroy, said the war against corruption was a work in progress and November 8, 2016, should not be looked at in isolation.

“We’re talking a lot about November 8, but there are a series of actions that the government has been taking ever since coming to power, starting with setting up an SIT on black money, followed by the Benami Transactions Act, an act for transparent auction of coal mines, the Income Declaration Scheme, the RERA Act and the Jan Dhan Yojana.

“We have been witnessing the overall intent of the government of cleaning up the economy across various sectors and demonetisation was just a trigger and one of the boldest steps,” Desai told IANS.

IANS

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