The demonetisation effect on border town Raxaul: Income loss, dependence on Nepalese currency

In Raxaul, a town on the India-Nepal border in Bihar’s East Champaran district, public opinion is split on “notebandi”.

Its effects were palpable as one walked around the town’s bazaar, packed with stores selling clothes, household durables and jewellery, all open but almost all of them empty. Inside, staff sat idle while shopkeepers chatted with each other. “Market mein jaan nahin hain,” said a man selling belts at a roadside stall. The market is dead.

Further down the road, the vegetable market showed more signs of life. Unlike consumer durables, where retailers have little room to reduce rates, India’s food economy has dropped prices as demand fell. And so, there was more activity here. A man unloaded squawking hens from a mini-truck. A labourer hauled a sack of cauliflowers on to a bike. People milled around, asking for the price of vegetables.

However, business is slower that usual here too. “I am doing 50% of the business I usually do,” said a man selling methi from a plastic sheet spread by the roadside. “There is no change. People keep coming with Rs 500 notes. And I have to turn them away.”

He used to earn Rs 500 a day but just manages Rs 200 these days. This narrative of steep drops in income is all too familiar in this border town.

There is little liquidity here. Step inside the State Bank of India branch on the town’s main street and there are so many queues, it looks like a railway reservation centre from the 1980s.

Small traders are making do with Nepalese currency but larger businesses are stuck. Take the case of Manoj Kumar, who runs a trucking firm called Shree Sangam Transport. To dispatch a truck, he needs Rs 25,000. Which means that, given the government’s withdrawal limit of Rs 50,000 a week from a current account, he cannot send out more than two trucks. But even that is impossible, he said, as the banks do not have any money. “We get what the banks can give,” he added.

For and against

This is the refrain one hears repeatedly in this town. So, this reporter asked the people what they thought about the government’s demonetisation decision. Some, like Sona Lal, a wholesaler of dried red chillis, are furious. “All this talk that farmers should put money in banks – do banks make it easy for people to transact there?” he asked. “If I want to deposit more than Rs 49,000, I have to show a PAN number. How many farmers have a PAN number?”

That is a valid point. Given that the government will not accept Rs 500 and Rs 1,000 notes after December 30, people – farmers, migrant workers, whoever – without permanent account numbers have little time to get one. With the government also stopping the exchange of demonetised notes, they have few alternatives to selling their cash to touts at a discount.

Lal said the entire demonetisation plan was poorly thought out. “That Rs 2,000 note is a stupid idea, no one will give you change,” he said. About all the talk of moving towards a cashless economy, he said, “The prime minister says he used to sell chai but did he ever see anyone swipe to pay for tea?”
 But forget us, he added, the worst affected by the cash crisis are the urban poor. “In villages, people will still find food and water but in cities, you need money for everything – from house to food to water,” Lal said.

Other residents were more sanguine. Some alluded to Prime Minister Narendra Modi’s statement, shortly after the demonetisation announcement on November 8, about the inconvenience lasting 50 days. “We will wait that long and then decide whether all this pain has been worth it,” they said.

And then there were those who were all for the policy. Such as Ajay Tiwari, a wholesaler of bananas. A supporter of the ruling Bharatiya Janata Party, he was scathing in his criticism of his state’s politicians – Rashtriya Janata Dal chief Lalu Prasad and Chief Minister Nitish Kumar. But his reasons for supporting notebandi go beyond his relative affluence or his political leanings. He mentioned a doctor in his neighbourhood, who allegedly had Rs 36 crores in unaccounted wealth and died of a heart attack after the announcement. This is a comeuppance for those who misused their positions to get black money, he said, adding, “Yeh bahut achcha hua.”

Those complaining about the inconvenience, he said, did not understand. As for the shock, he asked, “How is this any different from the shock a family faces when there is an earthquake or a flood?”