Demonetisation woes and the muted reaction

Last Wednesday, S Raju, a farmer from Anantapur district, brought around two tonnes of tomatoes to Bowenpally market in Secunderabad but had to return home empty handed.

Raju said he spent nearly Rs 4 per kg to raise the tomato crop and it cost him another Rs 2 per kg to transport the produce to Secunderabad, more than 400 km from Anantapur.

But he was shocked when traders at Bowenpally offered not more than Rs 2 a kg for his crop.

Raju realised the price quoted was not sufficient even to meet the transportation cost, as he had to travel back to Anantapur.

Frustrated, he unloaded boxes of tomatoes and dumped them in the market yard, before cursing the traders and market authorities. Some vendors picked up tomatoes for free, while cattle feasted on the remaining dump.

“Apparently, he has come all the way to Hyderabad, because tomato prices came down drastically in Anantapur market,” Srinivas, a local commission agent, told the media.

Some distressed farmers threw their onion produce in front of stray cattle at the Neemuch market in December. (Arun Mondhe/Hindustan Times)

Some distressed farmers threw their onion produce in front of stray cattle at the Neemuch market in December. (Arun Mondhe/Hindustan Times)

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The Indian demonetisation fiasco

More than a month ago, on November 8th, in a nationally televised speech, Indian Prime Minister Modi announced that from that midnight onwards 85% of value of cash in circulation in India will become invalid. The two higher denomination currency notes of Rs 500 and Rs 1000 which were withdrawn from circulation formed the bulk of cash in use. Government gave time till December 30 to exchange or deposit old invalid notes, but put heavy restriction on the amount of withdrawal of new notes from Banks.

The stated reason for such a drastic move was to curb black money, eliminate counterfeit notes and to reduce terrorism.  Looking back after a month it seems the move failed in all counts while putting ordinary people, especially the poor to severe hardships. Moreover it opened new avenues of corruption with involvement of bank and income tax officials.

Most economists were very critical of the move. Here are some excerpts of the criticisms.

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