8TH November 2016 brought a revelation and caused turmoil in the lives of many. There are two kinds of people working in the sector. One the regulated and the other unregulated. The informal sector finds abode in every industry and forms a major sustaining element. They account for around 50% of GDP and 90% of employment. People working in small eating joints, handicraft, vegetable vendors, daily wage workers, etc. form a major part of this sector. They are highly remote to the idea of banks and online transactions. It’s a highly cash driven isolated and an unprotected sector.
There are daily wage earners in the construction and real estate industry, the handicraft weavers in the tourism industry, farmers in the agricultural industry were hit the most. Most of them lost their jobs and immigrated back home. Leading to a 60% rise in NREGA jobs. With the upheaval in demand coming into the picture, the government should increase the provision of 100 days to 170 days. The Non-Banking Financial Institutions, small ticket banks, and Microfinance Institutions should be given ease in the procedures for bank account transactions.
The tourism industry vouches on the handicraft weavers, street vendors, and local performers. December and January being prime holiday season have seen a setback due to sudden cash crunch.
The sowing season was due in a month when the news hit the market. Scarcity in cash lead to delay in the procurement of seeds, fertilizers. The yield will fall owing to late sowing and will be to increase the subsidy on seeds and other agricultural equipment. After being hit badly small and medium enterprise have shown significant signs of recovery. SMEs have proven that they don’t need cash at a transactional level. Demonetization could prove to be a boon for SMEs and could possibly trigger the reset they needed. With the yet to be implemented GST simplifying tax laws alongside demonetization will provide a boost to the e-commerce businesses, as more and more customers turn to online platforms for convenience.
In a nutshell, this move by the government comes with a lot of aspirations and criticism. The question lies whether this bold move is set to see a downfall in the near future or was it about time the Indian economy got an upgrade.