One year of demonetisation: Why Kanpur can't save its hide from note ban

On November 8 last year, Prime Minister Narendra Modi announced the withdrawal of legal tender status to Rs 500 and Rs 1,000 notes. The move, which drained out 86% of currency in circulation, caused massive economic disruption. While remonetisation subsequently gathered pace, economic activity was disrupted again by the shift to GST. To understand how businesses have fared over the past year, Business Standard spoke to entrepreneurs in Kanpur, Tirupur, Bhiwandi, and Ludhiana.

Just outside Kanpur Central Railway Station, a long line of autorickshaws jostle for space. For the more modern traveller preferring to hail a ride on an app, a group of auto drivers armed with smartphones await.

After starting his vehicle, middle-aged Dinesh Singh tries hard to negotiate through traffic, finally confessing that he has only recently donned the driver’s uniform, having been a watchman at a large footwear factory till about four months ago. With two daughters and another child on the way, he says he’s lucky to have found work after the factory suddenly laid off workers with only two days’ notice, citing lack of funds, following the demonetisation drive.

Now barely able to make the Rs 15,000 he earned earlier, he says demonetisation is a good reform which suffered bad implementation but brought about many benefits. “While people have gone back to paying in cash, notebandi (demonetisation) has at least introduced more people to apps, through which more and more people are riding nowadays,” he says confidently.

Such is the opinion of the majority of workers, labourers, and traders, who make up the working class of this sprawling industrial city, employing more than 6 per cent of Uttar Pradesh’s urban workforce, according to the Sixth Economic Census, 2012-13.

Shah Rashid Ali, a karigar at a tannery says he has been unemployed for most of the past 6 months

Located less than 100 km from Lucknow, Kanpur bears the appearance of a tumble-down, dusty, urban mess with a population bursting at the seams. While the signs of a much-needed urban renewal such as shopping malls and residential high-rises dotting the skyline, most remain unfinished or are progressing at a snail’s pace.

Since the city is so cloistered, land prices in central business districts were much higher than those in other cities in Uttar Pradesh before demonetisation, an officer in the land department of the Municipal Corporation pointed out. 

However, after November last year, prices fell and the real estate market, which operated mostly in cash, the same as everywhere else, crumbled.

As project deadlines are pushed back, many shopkeepers of Naveen Market, one of the oldest markets in the city, grow impatient after giving their land for a shopping complex-cum-multi-level car park in the area with the promise of retail space after the property is built.

Kanpur Central Station

But with the local councillor brokering a reduction in rent, they say they are ready to wait for another year.

Nearby, the economic casualties of the demonetisation drive and the subsequent goods and services tax (GST) regime, introduced six months later, are visible along the shops nestled in the shadows of tony Mall Road selling leather goods. “With supply from small manufacturers becoming choked, we are forced to source from larger players in the market who dictate prices and have undercut profit margins by half,” Sanjeev Shukla, secretary, Small Traders Association, rues.

Kanpur has long been called the leather capital of India. Despite years of losing investment and skilled workers to upcoming hubs such as Chennai, Kolkata, and Noida, the city still has the highest concentration of leather-based manufacturing units in the country and accounts for more than 16 per of all leather goods exports from India, according to the figures of the Kanpur-based Council for Leather Exports.

The industry also supports more than 400,000 people directly, with informal estimates for indirect employment pushing past 1 million. But since November last year, many among the 400 registered tanneries in the eastern suburbs of Jajmau have remained closed for months. 

A recent government report shows that more than 60 still remain closed under the dual pressure of demonetisation as well as increasing vigilance by the National Green Tribunal, which has stepped up efforts to reduce effluents flowing into the Ganga. The majority continue to suffer from under-capacity.

“The industry has gone through some adjustment after demonetisation. Firms that focus on exports have not been affected that much. However, since the supply chain was earlier dependent primarily on cash transactions, smaller players have faced difficulties. In the Kanpur zone, we expect revenues in the sector to be hit by up to 20 per cent,” said Mukhtarul Amin, chairman of Superhouse Group, a leading leather-manufacturing conglomerate and one of the largest exporters of the country.

However, behind the figures lie raw human stories. Shah Rashid Ali, a karigar (skilled machinist) at one of the units, has gone through nearly six months of unemployment. “Khali pet so jana toh maan lenge, lekin jab kaam karke bhi khali haath ghar lautna padta hai, bohot bura lagta hain (I can go to bed hungry but when you have to return empty-handed even after a hard day of work, it feels very bad),” he says now.

He refers to the fact that with many smaller tanneries still closed and workers in abundance, tannery owners have slashed wages and are allegedly making workers toil for two-three days without payment on condition that they’ll be retained for the coming workweek. He says demonetisation helped wipe out illegal cash stashed with local moneylenders in his village near Unnao but also points out that farmers facing distress have had to sell good farmland at throwaway rates.

The hosiery industry — the city’s second largest in terms of the number of units — hasn’t fared any better. Unlike leather, while many companies have adopted vertically aligned operations, thereby reducing risks arising out of demonetisation, the GST has been the principal bane here. “We have a lot of customers in non-urban areas who are still confused about the rules. They have stopped buying from organised players,” said Balram Narula, managing director of Jet Knitwear.

Traders had been petitioning the government authorities to allow land to expand the hosiery manufacturing cluster in the city’s Dadanagar locality. The Kanpur hosiery market is about Rs 600 crore, which is bound to dip by more than 20 per cent, Narula says.

However, one Kanpuria has made it his mission to vote out the Bharatiya Janata Party at the Centre, come 2019. Silver-haired Raghunandan Pandey, a veteran porter of 26 years at the railway station, seethes with anger while eyeing younger ones running towards potential patrons. These new entrants into his profession were all labour hands at small garages near the station and have lost their jobs over the last year and are now practically crashing the established rates for luggage hauling.

Asked whether demonetisation is responsible for this predicament, he says he doesn’t care as long as they go back wherever they came from.