 "Barter economy is reborn in villages as India cancels cash")
The day after Prime Minister Narendra Modi banned Indians from spending their 500- and 1,000-rupee notes, merchant Bhagirath Barik started getting strange offers.
Rice, honey, leather. With large bills voided, his neighbors were offering to barter whatever they had for his vegetables and spices at the weekly market.
“We have to feed our children,” said Anima Sandha, who helps run a small beauty parlor in Mr. Barik’s village of Khulia, in eastern Orissa state.
Mr. Barik traded one customer a kilogram of potatoes, cauliflower and tomatoes for half a liter of honey. That was a good deal, he says. In normal times, the honey would be 120 rupees in the market (around $1.80) and the vegetables 70 rupees.
But these are not normal times, not in Khulia or anywhere else in India.
As authorities struggle to replace the more than 20 billion notes that are being yanked out of the economy to punish cash-hoarding tax evaders, the sudden scarcity of paper money is being felt most acutely far from India’s megacities.
In the countryside, bank branches are few and understaffed. Villagers report waiting all day at a bank for usable bills, only to return home empty-handed. Cash machines are also rare. India only has 18 for every 100,000 adults. In Japan and the United Kingdom, the figure is around 130.
“You needed to have almost a military-style remonetization effort” to get the new bank notes out, said Partha Mukhopadhyay, an economist at the Centre for Policy Research in New Delhi. “That hasn’t happened.”
Few rural residents have debit or credit cards or the ability to make digital payments. So to get by, communities are turning to decidedly older forms of cashless payment.
Rice, abundant after the autumn harvest, has become a common medium of exchange. Rice for lentils, rice for potatoes, rice for cooking oil, rice for salt. One woman in Orissa even said she traded rice for the flattened rice flakes known as chivda.
“This was the only way I could make sure my family had vegetables and lentils with their meals,” said Drubandini Nahak, who lives in Chudapali village, in Orissa. “Money is no longer available.”
In Ayatpur, another village in Orissa, Sandhayarani Sahoo came to buy clothes for her daughter’s wedding. A shopkeeper gave her saris, lungis and cotton towels for no money up front—but took her gold earrings as collateral.
For rural India, a prolonged liquidity shortage would not merely be an inconvenience. The winter sowing season began not long ago, and growers need cash to pay for seeds, fertilizer and farmhands. The government has eased withdrawal restrictions to try to rush more hard currency to farmers and agricultural traders.
The lack of cash in the countryside is affecting big-city markets. The volume of fruits and vegetables arriving at Delhi’s Azadpur wholesale market is down 75% from normal levels, said Yogesh Sonkar, a trader, on Friday.
Even if farmers agree to sell produce on credit, Mr. Sonkar said, the truckers who would transport it want cash up front. “The market looks almost deserted,” he said.
So far, there is not much evidence that food is becoming widely unavailable as a result. Retail prices for common grocery items haven’t seen much movement since last week, according to daily data from India’s Department of Consumer Affairs.
“Next week, if the currency supply is OK again, then everything might go back to normal,” said Babu Ramchandani, a fruit exporter in Mumbai. “Let’s hope for the best.”
In the northern state of Bihar, farmer Shankar Mahato needed milk—lots of it—to make sweets for his daughter’s wedding. His neighbor Virender Kumar owns a couple of cows. They struck a deal: all the milk Mr. Mahato needs, in exchange for a five-day supply of vegetables from his farm.
“We trust each other enough,” Mr. Kumar said. “I don’t think either of us will default on our promise.”
In the state of Haryana, just west of Delhi, Ram Mehar recently swapped 25 kilograms of rice for some clothing for the women in his family. “We are able to manage this way,” he said.
Others said they hoped to be able to transact with money again soon.
“It is becoming very hard to survive,” said Ms. Sandha, the beauty-parlor worker in Khulia. “How many days are we going to barter?”
—Biman Mukherji and Krishna Pokharel contributed to this article.
Source: The Wall Street Journal
Rice, honey, leather. With large bills voided, his neighbors were offering to barter whatever they had for his vegetables and spices at the weekly market.
“We have to feed our children,” said Anima Sandha, who helps run a small beauty parlor in Mr. Barik’s village of Khulia, in eastern Orissa state.
Mr. Barik traded one customer a kilogram of potatoes, cauliflower and tomatoes for half a liter of honey. That was a good deal, he says. In normal times, the honey would be 120 rupees in the market (around $1.80) and the vegetables 70 rupees.
But these are not normal times, not in Khulia or anywhere else in India.
As authorities struggle to replace the more than 20 billion notes that are being yanked out of the economy to punish cash-hoarding tax evaders, the sudden scarcity of paper money is being felt most acutely far from India’s megacities.
In the countryside, bank branches are few and understaffed. Villagers report waiting all day at a bank for usable bills, only to return home empty-handed. Cash machines are also rare. India only has 18 for every 100,000 adults. In Japan and the United Kingdom, the figure is around 130.
“You needed to have almost a military-style remonetization effort” to get the new bank notes out, said Partha Mukhopadhyay, an economist at the Centre for Policy Research in New Delhi. “That hasn’t happened.”
Few rural residents have debit or credit cards or the ability to make digital payments. So to get by, communities are turning to decidedly older forms of cashless payment.
Indian villagers wait inside a bank to make the transactions in Basendua village in the northern state of Uttar Pradesh on Wednesday. Photo: Agence France-Presse/Getty Images
Rice, abundant after the autumn harvest, has become a common medium of exchange. Rice for lentils, rice for potatoes, rice for cooking oil, rice for salt. One woman in Orissa even said she traded rice for the flattened rice flakes known as chivda.
“This was the only way I could make sure my family had vegetables and lentils with their meals,” said Drubandini Nahak, who lives in Chudapali village, in Orissa. “Money is no longer available.”
In Ayatpur, another village in Orissa, Sandhayarani Sahoo came to buy clothes for her daughter’s wedding. A shopkeeper gave her saris, lungis and cotton towels for no money up front—but took her gold earrings as collateral.
For rural India, a prolonged liquidity shortage would not merely be an inconvenience. The winter sowing season began not long ago, and growers need cash to pay for seeds, fertilizer and farmhands. The government has eased withdrawal restrictions to try to rush more hard currency to farmers and agricultural traders.
The lack of cash in the countryside is affecting big-city markets. The volume of fruits and vegetables arriving at Delhi’s Azadpur wholesale market is down 75% from normal levels, said Yogesh Sonkar, a trader, on Friday.
Even if farmers agree to sell produce on credit, Mr. Sonkar said, the truckers who would transport it want cash up front. “The market looks almost deserted,” he said.
So far, there is not much evidence that food is becoming widely unavailable as a result. Retail prices for common grocery items haven’t seen much movement since last week, according to daily data from India’s Department of Consumer Affairs.
“Next week, if the currency supply is OK again, then everything might go back to normal,” said Babu Ramchandani, a fruit exporter in Mumbai. “Let’s hope for the best.”
In the northern state of Bihar, farmer Shankar Mahato needed milk—lots of it—to make sweets for his daughter’s wedding. His neighbor Virender Kumar owns a couple of cows. They struck a deal: all the milk Mr. Mahato needs, in exchange for a five-day supply of vegetables from his farm.
“We trust each other enough,” Mr. Kumar said. “I don’t think either of us will default on our promise.”
In the state of Haryana, just west of Delhi, Ram Mehar recently swapped 25 kilograms of rice for some clothing for the women in his family. “We are able to manage this way,” he said.
Others said they hoped to be able to transact with money again soon.
“It is becoming very hard to survive,” said Ms. Sandha, the beauty-parlor worker in Khulia. “How many days are we going to barter?”
—Biman Mukherji and Krishna Pokharel contributed to this article.
Source: The Wall Street Journal