India’s currency crunch bites business

Bloomberg

Major wholesalers at Delhi’s largest fruit and vegetable market, which serves most of the capital’s nearly 17 million people, are planning to sell their products at bargain prices in order to move perishable stock as the impact of India’s cash shortages continues to bite.
Sales are down by as much as 50 percent at Azadpur Mandi, traders said, while the price of some fruit had fallen by as much as 25 percent since Prime Minister Narendra Modi shocked the nation with the withdrawal of large denomination notes last week.

Cash shortages
Eight days since Modi’s announcement there was no sign the government had managed to print enough notes to replace its withdrawal of 86 per cent of currency in circulation.
The government is falling far short of meeting people’s requirements for 100 rupee notes, finance ministry officials, who declined to be identified citing rules, said, admitting they were not in a position to fill the gap any time soon. Only 2000 rupee notes are circulating in good numbers, they said.
Adding to the chaos were rumors the government was planning to announce further measures, however India’s state-run Press Information Bureau said talk of plans to demonetize smaller notes was a myth. State Bank of India, the country’s largest lender, has handled 1.5 trillion rupees of cash transactions, including deposits, withdrawals and exchange of banknotes, starting last Thursday through 7 p.m. on Wednesday, it said in a statement.
About 25 percent of the business is done by cash and the majority of the cash business has vanished, said Ashok Kumar, who has been trading in fruit for three decades.
“We are sitting almost idle,” Kumar said. “I have asked my suppliers to reduce supplies. There are no buyers in the market. These are perishable and we can’t store them for long.”
Tempers fray
Less than an hour’s drive from India’s capital New Delhi, the situation was no better. Tempers frayed as farmers and day laborers stood in long lines outside banks, while inside fights broke out over the slow pace of currency exchange.
Not a single functioning ATM machine appeared to be operating between Delhi and Chithera, across the border in Uttar Pradesh, India’s most-populated state that is facing an election early next year.
Fuel stations were empty and in the nearby customs yard, thousands of trucks were stranded, their drivers sitting in groups playing cards. They say they’ve been unable to work for a week because transport company owners couldn’t get cash from the banks to buy fuel or pay their 100-rupee daily allowance for food. Their business depended heavily on wads of the now-banned 500-rupee notes, they said.
People abused guards at Dadri’s Bank of Baroda office, while nearby policemen did little to break up a scuffle in the unruly queue outside. Most men in the lines — some who were queuing for a second day after banks ran out of cash — said they were daily wage workers who had no choice but lose a day’s pay in order to access a small amount of money. Since Nov. 8, more than 30 people have lost their lives because of heart attacks while waiting in line or from suicides related to the stress of accessing cash, the Indian Express reported on Wednesday.

Trucks idle
Sundar Singh has not driven his truck since Modi’s announcement, which was aimed at eliminating unaccounted money from the economy and reigning in corruption.
“There’s no work. I can’t even charge my cell phone because I don’t have any change,” the 38-year-old from Aligarh said. “
We drivers had to go hungry because no hotel would accept 500 rupees, nor could we get change.”
His concerns were echoed by fellow drivers and by those who resented wasting days standing in queues to access the smallest amount of money. “Modi’s getting his food while my children are going hungry,” said Kamlesh Sharma, 40, a housewife. “I had to drop everything at home to stand here. First to deposit whatever little money I had at home and then to withdraw the paltry few rupees that the bank allows us to. If I don’t, my husband has to lose a day at work.”