ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Currency Shortage

Effect on Small Vendors

The after-effects of the demonetisation of 500 and1,000 banknotes still continued to be felt well into 2017. A study of Pune’s local markets enumerates the impact, compounded by the confusion over the goods and services tax.

“The local markets have not recovered from 8/11,” the chemist told us ruefully. He was attributing to a 60% drop in his sales to demonetisation of high-value currency notes, subsequent currency shortages that have persisted, followed by the goods and services tax (GST)-linked confusion. We had basically assumed that since medicines were a necessity their demand would be relatively inelastic. Such a substantial drop was odd.

This article is based on the fieldwork conducted in Pune’s local markets in April–May 2017, two months before those setbacks were compounded by the uncertainty about GST. This explanation will indicate the micro foundations of a macro process now called “slowing down” after 8 November 2016. It will also illustrate why demand for credit has tapered off at the bottom of the pyramid and what this means for the process of “financial inclusion.” One person’s expenditure is another person’s income and consumption in the circular flow of transactions constitutes national income. The decision to restrict the availability of cash unfavorably affects income and consumption of those who cannot afford to move to other means of transaction. Since cash is the most familiar and cheapest medium of exchange, its paucity will go on to become yet another factor in the process of exclusion, marginalisation and social division.

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Updated On : 27th Jul, 2018
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