Demonetisation has affected every Indian, but it has hit the agricultural sector the hardest. Farmers, who are the backbone of our national economy, were severely affected by the note demonetization of 8 November 2016 which invalidated 86% of India’s currency. Invariably, the majority of these effects were – and continue to be – negative in nature.
Agriculture in India accounts for 50% of the workforce. The agrarian economy of India is primarily cash-based and village-based. Farmers tend to be unable to avail digital services as such they tend to be digitally illiterate; in many parts of India, farmers don’t even have bank accounts. Their main and in many cases only source of income is from the crop produce of their land.
It must be noted that the timing of demonetization was highly damaging to farmers. It came following an above-average monsoon season, but farmers were unable to cash in on the benefits of abundant rainfall due to the overnight implementation. The situation was made more dire and desperate as most farmers have their savings only in cash and the winter sowing period was severely hit, and farmers were forced to sell their produce at abysmally low rates. Furthermore, when banks failed to exchange the farmers’ old notes or give them loans, local moneylenders exploited the situation by charging inhumanly high-interest rates.
Below are a few of the examples of the instances that prove that farmers bore the hardest brunt of demonetization.
- A farmer in Telangana, unable to sell his land to repay outstanding debts, adds pesticide to the family meal, killing himself and poisoning the others. This is just one of several cases of farmer suicides directly or indirectly caused by demonetization.
- The forced closure of District Central Cooperative Banks in Maharashtra has a deep impact on agriculture with sowing activities for the new rabi season coming to a halt and the entire rural economy down to the farm labourer and the village Kirana shop taking a hit.
- Alcoholism rises in Andhra Pradesh as farmers cope with the cash crunch and find that local liquor stores are the easiest places to exchange old notes.
- PM Modi defends demonetization and says “The Government’s decision has several gains for farmers, traders, labourers, who are the economic backbone of our nation. No longer will the progress and prosperity of rural India be curtailed by corruption and black money. Our villages must get their due.”
- The Managing Director of the Indian Farmers Fertiliser Cooperative says that “demonetization will benefit farmers in the long run”, arguing that an agricultural sector based on cashless transactions is in the best interests of everybody.
- The rural economy of Bundelkhand, one of India’s poorest regions, slowly crumbles as farmers bear the brunt of demonetization. A prolonged monsoon has destroyed the local Kharif crop, and undeveloped irrigation has worsened the situation. Furthermore, to deal with the cash crunch, traders have halved the price of many commodities.
- Relatively wealthy farmers slowly adapt to digital transactions.
- Deficient rain has reduced the yield of Toor dal by around 40% in rural Karnataka. Furthermore, without cash, farmers are unable to buy seeds for the rabi season.
- Unable to sell their paddy as buyers are offering to pay in the old currency, over 70% of Uttar Pradesh’s perishables are on the verge of rotting. In the case of tomatoes and potatoes, losses are over 80%. Meanwhile, farmers are forced to loan money from local moneylenders at outrageously high-interest rates.
- Defying expectations, Punjab’s farmers manage to scrape through the note monetization and plant wheat for the rabi season.
- Despite record-setting tomato harvest this year, farmers in Chhattisgarh are forced to sell the vegetable at 25 paise/kg.
- Maharashtra, which produces over a third of the nation’s onions, sees farmers forced to deal with onion rates halved.
- In West Bengal, beedi units have shut down, crippled by the cash shortage, leaving thousands of home-based beedi rollers – mostly women – with no income.
- Farmers in Kerala struggle to afford pesticides, fertilisers, and labour for the already planted crops.
- Flower prices crash in Madhya Pradesh, one of India’s poorest States, even as local farmers lament 50% – 70% drops in income.
- To provide relief to farmers affected by demonetization, the Centre extends loan period by 60 days.
- Instances of agrarian unrest rise. Many clashes between farmers and local police reported in Uttar Pradesh.
- Farmers fail to cash in on the above-normal monsoon; rural markets contract by 30% – 50%. Cauliflowers are sold for Rs 3/kg in Bihar while tomatoes are sold for less than Rs 2/kg in Andhra Pradesh.
- After initial weeks of slowdown, Mumbai’s Vashi market reports a return to normalcy. However, the situation remains sceptical as the market conducted 70% of its pre-demonetisation transactions electronically.
- Noida workers laid off after they refused to accept their pay in demonetized notes.
- Farmers in Rajasthan forced to resort to the barter system; they begin to trade their wheat produce for basic commodities.
- As rural economies around the country suffer, Goa is seemingly the only bright spot. Goan farmers cope with the new financial terrain surprisingly quickly, helped by Goa’s relatively more modern agricultural sector. The agricultural department sources said that there is no effect of demonetization on the farming activities and as far Goa is concerned it is functioning almost normal.
- Demonetisation buoys private moneylenders to cash in on the crisis. Local banks can manage on 18% of the Rs 13,558 crore loans required for the rabi season due to a shortage of cash. Private moneylenders jump in to fill the vacuum. The result is catastrophic for farmers as moneylenders charge interest rates anywhere between 24% to 120% while local banks used to charge around 10%.
- A bank in Maharashtra does little to recover Rs 352 crore owed by two sugar factories but threatens 20,000 farmers who owe Rs 180 crores, with public humiliation. The bank tells farmers they are to blame for depositors being unable to withdraw cash and warns them: “You should be aware that if any depositors commit suicide for such reasons, you will be held responsible…”
- The Reserve Bank of India directs banks to distribute at least 40 percent of currency notes in rural areas to relieve farmers of the hardships they had to face during this period.
- Dairy farmers struggle to make ends meet as they are not being paid even fifty days after demonetization.
- Despite above-normal rainfall and proper irrigation facilities, paddy cultivation occurs only on less than 20% of available land in Telangana.
- Farmers in remote villages in Madhya Pradesh are taken aback when they receive newly printed Rs 2000 notes from a State Bank of India branch without the image of Mahatma Gandhi.
Whatever be your opinion on note demonetisation, there can be no doubt that it was highly damaging to India’s farmers. We – the Government and the electorate – need to empathise with them, try to understand how and why the situation escalated in such a short span of time, and debate amends which can alleviate the farmers’ position.