Fall of commodity prices: boon or bane?
With the government confessing to the Supreme Court today that they are unable to meet the current demand of currency, it is clear that the long queues outside banks and ATMs might continue for at least a few months unlike what was earlier expected.
Demonetization has already affected industries including construction and automobiles and experts have warned that worst might be yet to come as problems have started setting into essential products as farmers are facing the heat of the demonetization with the prices of vegetables falling below average, pushing many of them into debt.
In a shocking incident, an image of people dumping tons of tomatoes in highway was posted by political analyst Davinder Sharma after the farmers failed to find profit as they were forced to sell 1KG of tomatoes for just 50 paise and ironically fifty paisa is currently almost out of circulation.
Another farmer from Bihar was finding it tough to sell his cauliflowers as the price fell from Rs. 12 to 2 for one kg since November 8 when Modi announced the demonetization of Rs. 500 and Rs. 1000 notes.
The fall in the price of essential commodities has come as a boon for end users as they are now able to buy commodities at cheaper price but the problem has worsened for producers, some of whom have got loans expecting good returns.
In a country that has been plagued by farmer suicides and with more than 3,00,000 farmer suicides reported in the last 20 years, things might turn from bad to worse for farmers if the government doesn’t come up with a plan soon, mainly because India is a predominantly agriculture-based society.
Coming to the daily wage jobs, things are no different as many in garments, textile, leather, and jewelry sectors were the worst affected. In total, close to 400,000 jobs have been lost since the announcement of demonetization.
Many employees quit their job because their employers were not giving wages in cash. Many people refuse money through bank transaction as they might lose their below poverty line status if more than Rs. 50,000 transactions happen in a year.
In a column in The Hindu, former Prime Minister of India and one of the best economist India has ever produced, Dr. Manmohan Singh, said that the “decision to demonetize will cause grievous injury to the honest Indian who earns wages in cash. The dishonest black money hoarder will get away with a mere rap on the knuckles.”
According to Dr. Singh, India, of course, has huge stakes of black money and counterfeit money, but he questioned the swift move of the Modi government which invalidated Rs.500 and Rs.1,000 currencies overnight seems to be this false notion that ‘all cash is black money and all black money is in cash’.
As Dr. Singh rightly points out, more than 90 per cent of India’s workforce still earns their wages in cash. He also writes that millions of agriculture workers, construction workers and so on might be the one being affected first.