Stability of a villager’s life is based on three strong pillars – Farm, Seeds and Crops which are cemented by hard cash. The entire rural economy revolves around cash, the most preferred medium of financial transaction. As per Reserve Bank’s Concept Paper on Card Acceptance Infrastructure, 8 Mar’16, it can be noted that while there has been significant growth in number of cards, the growth of infrastructure has been lower both numerically and in terms of geographic spread, and this has impacted the card usage. Hence, cash continues to be the predominant mode of payment as it appears to be “costless” in comparison to the visible costs associated with card / electronic payments.
Government is putting its best for e-money and plastic money and Debit cards vastly outnumbering the volume of credit cards issued in the country.
Further, a high number of debit cards have been issued in the recent times under the PMJDY, especially to customers in rural areas and small towns. We are little orthodox when it comes to hard cash and gold, we want it lays with us at home.
Even after being exposed to Debit and Credit cards KCCs and other way of electronic payments, being promoted by Govt, they are still hesitating using plastic money, there are many reasons to this; (i) cash is convenient, (ii) Ready, 24×7, (iii) matter of pride, (iv) can see transaction, (v) get a chance to visit back and meet friends, (vi) risk of forgetting password in debit / credit card, (viii) transaction fee etc. Stopping big currency put everything stand still.
Though I personally feel that demonetisation is a great stand but the initial fire is there among small and medium business. Most tiny and micro enterprises are proprietor-owned and are managed by just one person and they are facing the heat. Especially in rural parts where ATM and Bank populations have low penetration and the payments to the labourers and daily wagers are made in cash. Due to lack of Rs 100 and Rs 50 notes, payments are on hold, resulting into credit deals. Farmers are not able to pay the workers hence the buying of seeds and sowing is on slow track. Farmers expect a record harvest this year, but the rural economy largely depends on cash. Farmers buy seeds, fertilisers and farm equipment in cash, pay their workers in cash, and traders and commission agents pay farmers in cash. There is a significant downfall in sales in daily haats, big Melas like Sonepur and regular mandies. Walk-ins are less, affecting stock take offs.
Pre and post demonetisation, within a span of three weeks, I have visited the same mandies in Nashik. Fruits or vegetables traders are the sufferers, bidding was stopped for three days due to demonetising and cash crunch. Retail rates have gone up, resulting small traders are operating on tight margins. During my recent visits in North West Maharashtra and Chhittisgarh, I realise that villagers are living in cash crunch but looking forward to a new horizon, post demonetisation. They strongly believe that this is a starting of achche din, and me too.
(The author is a Rural Marketing expert and the views expressed in the article are his own)