Former Prime Minister Manmohan Singh had in November raised aspersions that demonetisation could contract India’s GDP by as much a 2 per cent. A low GDP would, in turn, mean slow economic activity, which is likely to have a direct impact on millions of jobs. Over a month down the lane, a study based on the first 34 days of demonetisation has revealed that micro-small scale industries suffered 35 per cent jobs losses. The report also says that the industry witnessed a 50 per cent dip in revenue.
As per a report in the Indian Express the study by the All India Manufacturers’ Organisation (AIMO) has projected a drop in employment of 60 per cent and loss in revenue of 55 per cent before March 2017.
The study said that almost all industrial activities have come to a halt. As per the study, what contributed to the slowdown is “zero cash inflow, rules curtailing cash withdrawals, staff absenteeism, a weaker rupee, choked fundraising options, inability of banks to work on proposals, derailed real estate sector, fear among foreigners, poor preparedness, and the uncertain status of GST.”
The report has not entirely come as a surprise as it was predicted in November that labour-intensive sectors like textiles, garments, leather and jewellery are also staring at temporary job losses. It was reported that nearly 4 lakh people, mostly daily wagers, lost their jobs or left work due to nonpayment of wages.
A jute mill in Howrah in West Bengal had temporarily shut down as it was unable to pay workers in the after effect of the Narendra Modi government scrapping the old Rs 500 and Rs 1,000 notes.
Not just micro-small scale industries and labour-intensive sectors, but other industries like media are also claiming that they are suffering from the impact of demonetisation. However, blaming the government for shutting down bureaus seems far fetched as there is no data to corroborate those claims pertaining to the losses incurred since November 8 when the decision was announced.
Several economy watchers like the Goldman Sachs, Moody’s, Care, Icra have also warned about the adverse impact of demonetisation in the economy. Noted development economist Jean Dreze said, “demonetisation in a booming economy is like shooting at the tyres of a racing car”.
It has been two months now that the demonetisation was announced. Though the chaos outside banks has decreased, the economy is yet to gather its pace. Quick measures need to be taken by the government to control its losses before it backfires on its own agenda of growth and development.