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Demonetization Effect: 6 Months After India Currency Ban and Poor Still Feel the Heat of the Decision

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Like thousands of businesses as currency shortages ease, sales have bounced back for Charanjit Yadav, who sells generator sets and batteries in the business hub of Gurugram near New Delhi. (A. Pasricha/VOA)
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Like thousands of other small-business entrepreneurs in India, Charanjit Yadav saw his sales of generator sets and batteries plummet in the weeks after the government’s surprising move to scrap 86 percent of the country’s currency last November.

Six months on, as business booms, Yadav only recalls the currency ban when he looks at the crisp new notes that have replaced the old ones. “Everything is back to normal. It is absolutely OK for my work,” he said, glancing at the orders placed on another busy day.

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But less than a kilometer from the bustling market where his shop is located in the business hub of Gurugram, near New Delhi, the massive cash crunch that India faced for more than two months has left its mark.

Braving sizzling summer temperatures of 44 degrees C (111 degrees F), a group of construction laborers had waited since dawn at a junction where contractors normally come to hire daily wage workers.

Fewer opportunities

Dhani Ram left for his village in January after work dwindled as cash shortages stopped many real estate projects. He returned a month ago, hoping that finding work would be easier. That has not happened.

Cash shortages have eased, but Dhani Ram (in white shirt), a daily wage laborer, still finds it difficult to find work as the real estate sector continues to struggle. (A. Pasricha/VOA)
Cash shortages have eased, but Dhani Ram (in white shirt), a daily wage laborer, still finds it difficult to find work as the real estate sector continues to struggle. (A. Pasricha/VOA)

“I hardly get work for 15 days in a month,” he said. “Earlier, I used to get work for about 25 days a month.”

Unable to eke out a living from his tiny farm in Uttar Pradesh state, Gajinder Singh and 11 others in his village came to the city with a contractor who promised them work. But after four days, he had not been placed anywhere.

“I sleep at night under the rail station, I don’t know what to do,” he said in despair.

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Six months after India’s fast-growing economy was disrupted by the radical currency ban, growth is back on track in most sectors and stock markets are surging. But many poor people still scramble to find work as the country’s vast informal sector continues to struggle.

Growth last year is estimated to have been around 7 percent — less than the 7.9 percent recorded in the previous year, but not as severely dented as many economists had feared. Indian officials say these numbers give the lie to grim warnings that the drastic move, meant to flush out untaxed money, would put a grinding brake on the economy.

“It was clearly not doomsday. Looks like it was a blip, a banknote blip,” said chief economist D.K. Joshi at Crisil research and consultancy in Mumbai.

Auto sales jump

Many indicators support that. Automobile sales have jumped in recent months as serpentine lines outside banks to exchange old notes vanished. Automakers have lined up new launches as shoppers again open their purses.

The situation has normalized at banks and ATMs, which had drawn huge lines of people wanting to change old notes for new a few months ago. (A. Pasricha/VOA)
The situation has normalized at banks and ATMs, which had drawn huge lines of people wanting to change old notes for new a few months ago. (A. Pasricha/VOA)

Projections that the economy is poised for stronger growth has led stock markets to hit a record high in the past week. The rally has drawn tens of thousands of new middle-class investors into the market amid optimism that growth is rebounding.

Economists say most sectors of the economy are back to normal except those that depend heavily on cash transactions, such as real estate.

N.R. Bhanumurthy at the National Institute of Public Finance and Policy in New Delhi said it would take more time to assess the full impact of the currency ban on the economy. But he said he was optimistic it did not erode confidence as was widely feared.

He pointed to India’s strengthening currency — the rupee is at a nearly two-year high and has gained about 5 percent against the dollar in recent months.

“While other currencies in the world are depreciating because of the strengthening of the U.S. dollar, ours is the only major currency that is appreciating. So that shows that the foreign investor seems to be betting heavily on the Indian growth story,” he said.

‘Devastating’ for many

However, while it is largely business as usual for the middle class and formal sectors, economists say the impact on tens of millions of people who depend on the informal sector — hawkers, vegetable sellers and laborers in cities and small farmers in remote villages — has been much harder. India’s informal sector accounts for 40 percent of gross domestic product but employs as much as 75 percent of the country’s workforce.

Despondent laborers wait for work at a busy junction in Gurugram near New Delhi. Demand for labor has dipped as work at many construction sites slows down. (A. Pasricha/VOA)
Despondent laborers wait for work at a busy junction in Gurugram near New Delhi. Demand for labor has dipped as work at many construction sites slows down. (A. Pasricha/VOA)

Calling the move “devastating” for the informal sector, economist Kaushik Basu wrote this week in the Indian Express newspaper that “the brunt of the pain of demonetization has been shouldered by the poor and the lower middle class.”

While the full impact on them may not yet have been reflected in statistics, the mood of despondency among those waiting for work in Gurugram gave support to such assessments. (VOA)

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BHIM app: All about going Cashless

The BHIM app was developed by NPCI on 30th December 2016 and later launched by PM Narendra Modi.

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BHIM app works across all bank accounts. Wikimedia commons
BHIM app works across all bank accounts. Wikimedia commons

The act of demonetization by the government last year had simply made us stand on our heels. People were fighting their way out in the absence of hard cash and thus made us oblige to the digital platform.

BHIM app is one of the various digital money transfer app (application) which uses UPI (Unified Payments Interface). The app was developed by NPCI on 30th December 2016 and later launched by PM Narendra Modi. It aims towards bringing Financial inclusion and making us a digitally empowered society.

BHIM app is backed by the Government of India making it a more reliable cashless payment option (unlike PayTM). Pixabay
BHIM app is backed by the Government of India making it a more reliable cashless payment option (unlike PayTM). Pixabay

Here, we will help you to walk through the procedure involved in the better use of BHIM app.

How to download BHIM app

  • You can download and install BHIM from Google play store for Android and Apple store for IOS.
  • Select whichever language you prefer.
  • Select the mobile number which is registered with your bank.
  • Set a 4 digit password to log in.
  • Link a bank account.
  • Now, you need to set a UPI pin by providing the expiry date and last six digits of your debit card.
  • Your account is now registered and you are ready to go cashless.How to use BHIM without internet
  • You can dial *99# from your phone and you will be able to avail the same features of BHIM on your mobile.
  • *99# can also be used to register for BHIM.
BHIM app has three level authentication including device ID or mobile number, bank account and UPI pin, which makes it the most secure option. Pixabay
BHIM app has three level authentication including device ID or mobile number, bank account and UPI pin, which makes it the most secure option. Pixabay

Features of BHIM app

Send Money
With this feature, you can send money by scanning a QR code, combination of Account Number and IFSC by using Virtual Payment Address (VPA).

Request Money
This feature allows you to send a collect request by entering VPA. Also, through BHIM, you can transfer money using a Mobile that is registered with BHIM or *99#.

Scan and Pay
This feature allows you to pay by scanning the QR code.

Transactions
This one will show your transaction history. It shows pending UPI collection request, so you can approve or reject payments. Also, there is an option to report if a user wants to raise any complaint.

Profile
This option will help you to view the static QR code and Payment addresses that are created. The QR can be downloaded and also be shared through WhatsApp or Email.

Bank Account
This feature enables you to check the bank account (which is linked to BHIM). You can set or change your UPI pin or the bank account linked with BHIM App by clicking on ‘Change Account’. You can also check your account balance using this feature.

BHIM is not a wallet. It is a payments application which allows users to make instant bank transfers. Pixabay

Why should you use the BHIM app?

  • It works across all bank accounts.
  • You can access it without internet.
  • BHIM is backed by the Government of India making it a more reliable cashless payment option (unlike PayTM).
  • It has three level authentication including device ID or mobile number, bank account and UPI pin, which makes it the most secure option.
  • All in all, BHIM has turned out to be the safest and most reliable cashless payment option against competitors like Paytm.