Thursday, June 1, 2017

Demonetisation – a Banking on Social Capital: Narratives from West Bengal

Unless there is 'satistics' people think nothing happens, India's Growth story after demonetisation, taken from The Telegraph, 1st June, 2017, page, 1

There has rather been a limited protest against the demonetisation initiatives taken in November 2016. Several economists of repute have criticized the demonetisation move. The disturbing reports of about a hundred deaths till December (DNA, India 2016) makes it difficult to comprehend the apparent peaceful assimilation of demonetisation effect by an otherwise vibrant public sphere of the country. In fact, it is expected that the recent election result in Uttar Pradesh, Uttarakhand, Manipur and Delhi would make many to rethink their theorisation on demonitisation drive. To make sense of such dilemma, first it is important to understand the nature of the impact of Demonetisation at rural India. There are reports of problems related to currency supply (Kumar 2017), cash shortage and its impact on farming because of inability of the farmers to hire labour (Takle 2016). Instances of destruction of premature tomato crops because of price fall (Aga and Choudhuri 2017, Shaikh 2016), farmer’s suicide in Telengana (Rahul 2016), shutting down of bidi binding units in West Bengal (Patra 2016), and an overall downfall of labour employment (The Indian Express 2016) are some of the major issues surfaced in recent past. While there are serpentine queues at the banks and ATMs everywhere, the poor and marginal experience the harshest blow. Only a small part of such inconveniences are reported. Ghandy (2016) mentions untold sufferings and chaos, reporting some of those untold sufferings is primary objective of this article. While reports of labour crisis, farmers’ suicide attract wide attention, there is a significant absence of the study of people’s day to day adjustments with the effects of demonetisation. Such events are hitherto unknown and almost never reported. 

One of the main reasons for the absence of mass protests from rural areas of the country is, of course, the failure of opposition parties to mobilize people effectively. However, as this field based article reflects, politicisation of protests against demonetisation by opposition explains only a miniscule part of the whole story; there are other, more grounded reasons that silence the protests before they can form. Since, there is a lack of mass protests, BJP and its allies often argue that much of the crises as reported by the opposition and media are politically cooked up phenomena. There are three common hypotheses made popular in explaining the lack of rural protests, a) people have accepted the necessary discomforts because of a 'better future', which is branded effectively by linking demonetisation with patriotism, ‘surgical strike’ against black money and cashless economy, b) people do not need more money than what is being dispensed by the banks, c) people have accepted such initiatives because of their accumulated disgust in facing everyday corrupt practices and they believe that this move would ‘definitely’ make an impact on corrupt people including politicians. However, these are at best hypotheses, and there is no field based concrete study on people’s perception of this sudden policy initiative. This article is an attempt to tease out some of the reasons that has the capacity to explain the silence silence of public sphere. I am doing field based ethnographic research in different Gram Panchayats (the village level lowest tier of three tier panchayat system) of Bardhaman, Bankura, Nadia, Purba and Paschim Medinipur districts in West Bengal on politics and everyday life of peasant societies. As part of this research I have experienced and collected some narratives on the ways in which people are adapting with demonetisation. Here, I have presented two major players of rural economy a) the small and marginal farmers, and b) small businessmen and informal economy.

I have seen that the impact is yet to reach the marginal farmers, primarily because of their existing powerful debt network. It is well known that with land reform movement, West Bengal has a significant number of small and marginal farmers. In most of the southern fertile delta plain they depend on a typical mechanism of debt network. This network exists most strongly in districts where cultivation is profitable, such as Bardhaman, Purba Medinipur, Nadia and parts of Paschim Medinipur. The nature of dependency most often begins in water debt network. The relatively well off farmers give water on credit to the small and marginal farmers. This is a typical exchange relationship in post land reform movement of the state which is aided by the substantive development of private water markets and onslaught of summer paddy (known as boro) (Nath, 2013a, b). The ‘quasi-zamindars’ – people having considerable amount (usually three to five acres) of land along with substantive income from other sources like teaching at schools or participation in informal storage economy usually own sources of ground water or pump sets necessary for lift irrigation. Marginal farmers are supposed to depend on these people to borrow water, manure, pesticides and other essential items of farming. At the end of each crop cycle, the quasi-zamindars are the persons to whom these marginal farmers are bound to sale their produce often at a throwaway price (Nath and Chakrabarti 2012). No matter how exploitative it may seem, this mechanism involves a considerable amount of ‘social capital’ networked through informal channels of economic and extra economic (such as friendship-neighbourhood network) relationships. A holistic and contextual combination of these factors ultimately constitutes the economic exchange relationships between marginal farmers, quasi- zamindars, storage and rice mill networks and ultimately the consumers. With demonetisation drive, this section is affected badly but through a time buffer formed by existing social capital. The credit network is made expensive after the demonetisation drive. 

“Yes, we have to pay more. They had no choice than to raise the price, because, right now we are not paying anything, they are bearing our cost and they have no cash in hand” said a marginal farmer from Baghnapara region of Bardhaman district (in Dcember 2016).

However, the price rise is not smooth everywhere. There are unreported minor conflicts in different places of Bardhaman, Hoogly, Purba and Paschim Medinipur districts. This effect also has a gendered dimension. The farmers nearby Mukutmanipur river dam in Bankura borrow pump-sets from the Self Help Group (SHG) members. The SHGs have procured such sets on loan. SHG members, who are exclusively women, are not allowed to raise the rates.

“We have told them that this is a government property, you have bought this on loan, where the GP has played a crucial role. Do not make price rise in so far as you can pay the loan instalments” – said one of the Trinamool Congress leaders of the region in January 2017.

Perhaps the difference is to be found both in the nature of economic transactions and gender issues. I have found that in several villages of Bardhaman, Birbhum, Hoogly, Purba and Paschim Medinipur districts, the privately owned sources are running on diesel or on electricity given by the pump-owners. In consequence, there is not much control of the marginal farmers over the time and extent of pump usage. For instance, in Hooghly, a user is supposed to declare the time duration of pump use. In case of diesel run pumps fuel is allotted accordingly. Electricity run pumps can be switched off easily. Hence, there is a difference between private owners and SHG owners, which further clarifies the cost of demonetisation imposed on already indebted small and marginal farmers.

Figure 1 A comparison of key factors of farming and impact of demonetisation (source: field data from Bardhaman, and Purba Medinipur)

As figure 1 suggests a large section of the small and marginal farmers are bearing the cost of the demonetisation, which is expected to have a long-term effect. While there is a stark increase in the key materials for farming in last ten years, demonetisation is making the situation worse. Apart from the cost of labour which has gone down because of lack of available employment opportunities, every other resource for farming is made costly. However, the apparent silence from different corners of peasant society is because of two related reasons, a) small and marginal farmers yet to feel the impact of demonetisation because of the buffer of existing social capital, and b) political parties have failed to bring social movements by involving these sections of the society.

As part of my research, I also work closely with the informal economy of the GPs. I have tried to understand the nature of the impact of demonetisation on rural informal economy. We can still recall the day after declaration of demonetisation initiatives some newspapers featured Mr. Narendra Modi promoting Paytm, an e-wallet as an alternative to cash. The symbolic value of Paytm is made parallel to cashless economy. It was followed by many news papers, eventually, as they reported and featured photos showing small shopkeepers, auto drivers accepting Paytm. However, as expected, Paytm is not an alternative to cash. The question is, in what ways India’s gigantic informal economy, bazaars and weekly haats have withstand the effect of demonetisation? During the first week of November, I was travelling to different places of Bardhaman and Purba Medinipur and I could see for first four to five days, there were demands for hundred rupee notes and rejection of five hundred or thousand rupee notes by the sellers. In consequence, people stopped making purchases unless it was absolutely necessary. Markets like Barabazar in Nabadwip, Nadia, weekly market of Howrah, Purba Medinipur was literally closed down. It is seen that, after the first week of demonetisation, in most of the places the shop keepers and stall holders started to accept old currency to run their business.  The immediate effect was felt by the small and marginal traders of perishable items, many of whom had to experience tremendous amount of loss. In a group discussion three factors become prominent in one of the daily markets in Purbasthali, Bardhaman:
Non acceptance of old notes means no sale; it simply cannot go on for long.
The people will not spare us (the sellers) if they do not get what they need.
If we do not accept old notes and others do, we would lose the customers.

We needed assurance from the wholesalers and suppliers. Since they have said that they will accept old notes, we have no problem to do the same.

Many other rural markets have put forth similar responses during this study. Quite clearly the market principle has compelled the old currency to circulate once more after demonetisation. However, because of the stipulated deadlines to submit the old notes to the bank, these were quickly deposited in different banks. It continued for several weeks until another blow came with the use of indelible ink, and eventually stopped when it was made mandatory for a person to give declaration and state reasons for possessing old currencies. In another discussion it appeared that with a linkage of election like procedures in the use of indelible ink, association of black money related stigma, penalty and the loss of man days at banks, people once again started to reject old notes. In December-January period, for weeks the daily rationing for thousands of families continued to run on credit. The entire economic activities through informal sector, to a significant extent ran on social capital. People gave credit to their regular customers and took materials on credit from their known suppliers.
In sum it appears that BJP government banked on existing social capital at an undetermined and unknown cost. There are many factors that escape popular perceptions and analysis like:

Loss of man days because of compulsory queuing at banks
Loss of resources (both material and human) because of a sudden fall of consumer’s demand
Indirect price rise because of rising prices in factors of agriculture productions.
Significant fall in labour demands not only in metro cities like Delhi but also in rural areas.

Such issues as stated above are difficult to translate in pure economic terms. However, it appears that the responses towards the demonetisation effort is yet to be felt, because of two reasons: a) the buffer provided by existing social capital and b) the actual situation is made mystified through the use of a strong hegemonic mechanism of prominent and powerful symbols like ‘Deshbhakti’-the patriotism, anti-corruption drive and sentiments associated with Mr. Modi’s charismatic appeal. Interestingly, BJP has banked with social capital not only in existing economic relations but also with the major part of public discourse which discussed about black money for quite some time (Reddy, 2017). It was indeed a calculated move, which despite of its dark sides appears to win popular consent. However, the apparent silence among the farmers and informal sector employees could only mean that the gruesome manifestation of demonetisation is waiting to appear in near future. Even when they appear it would hardly be linked with demonetisation. As one can easily understand that a farmer’s suicide at some point of time in 2017 would be linked with family conflict and never with demonetisation on November 08, 2016.

Aga, Aniket & Chitrangada Choudhury (2017): “Demonetisation Takes the Sauce out of Nashik’s Tomatoes. National Herald, January 5, 2017, Accessed from on January 26, 2017.
DNA India (2016): “Demonetization: Government not mourning over 100 deaths due to cash-Crunch, says Opposition.” Accessed from on January 23, 2017
Ghandy, Kobad (2016): “Demonetisation: One Step Forward, Two Steps Back” Economic and Political Weekly, vol 51, issue 50, pp. 28-30.
Ghatak, Maitreesh., & Maitreya Ghatak (2002): “Recent Reform in the Panchayat System in West Bengal,” Economic and Political Weekly, Vol 37, Vol 1, pp. 45-57.
Kohli, Atul (2011): “Politics and Redistribution.” In N. G. Jayal and P. B. Mehta (Eds.), Oxford Companion to Politics in India, pp. 499-509. New Delhi: Oxford University Press.
Kumar, Arun (2017): “Economic Consequences of Demonetisation” Economic and Political Weekly, vol 52, issue 1, pp. 14-17.
Nath, Suman (2013a): “Water Politics: Notes from Bardhaman, West Bengal.” Exploring Development, Institute of Social Sciences, March 15, 2013, Accessed from on January 27, 2016
Nath, Suman (2013b): “Joler Dor Thik Kore Rajniti, Tai Chash Kore Labh Thake Naa Chhoto Chashir (Water Politics and its Impact on Marginal Farmers, in Bengali).” Anandabazar Patrika, April 20, 2013.
Nath, Suman, & Bhaskar Chakrabarti (2011): “Political Economy of Cold Storages in West Bengal” Commodity Vision, Vol 4, No 4, pp. 36-42.
Patra, Arunava (2016): “Note Ban sends Beedi Units up in Smoke” Pari, December 17, 2016. Accessed from on January 26, 2016.
Rahul, M (2016a). “Curry Mixed with Demonetisation and a Pinch of Pesticide” Pari, November 22,2016. Accessed from on January 26,2017.
Reddy, Rammanohar C (2017): Demonetisation and Black Money. Hyderabad: Orient Blackswan
Shaikh, Zeeshan (2016): “Nashik: Farmers Getting Re 1/kg for Tomatoes” The Indian Express, December 12, 2016. Accessed from on January 26, 2017.
Takle, Niranjan (2016): “Demonetisation Spells Disaster for Farmers in Nasik” The Week, Dember 01, 2016. Accessed from on January 26, 2017.
The Indian Express (2016): “Demonetisation Brings Labour Industry to a Standstill” Indian Express, November 24, 2016. Accessed from on January 26, 2017. Termed as ‘new class’ by Cohli 2011, also studied by Ghatak and Ghatak (2002)


  1. Excellent and grounded research Kaleido, you could have published it in a journal or the like. Wonderful! Thanks for working with issues that matters

  2. People suffered but thought its sarkari and must be for good. A thought that we banked on along with the social capital.

  3. Yes, a timely article. Good work, Keep it up