How Demonetisation Affected Informal Labour

The impact of demonetisation on the informal economy in India went far beyond cash shortages. This article examines the informal waste chains in the Pune Metropolitan Region, and outlines the tussles that emerged between informal labour and informal capital in the days following demonetisation. The resulting loss of trust in transactions continued to linger long after the cash shortages had eased. It diverted some of the backlash of the informal, urban poor from the government towards the more immediate nemesis—informal capital—which saw an opportunity of accumulation in the mayhem of demonetisation

The authors would like to thank Lakshmi Narayan, Poornima Chikarmane, Harshad Barde, Maitreyi Shankar, Sonali Kunjir and Malati Gadgil for their help. They also thank the waste pickers and scrap dealers who were gracious with their time in addressing the authors’ queries. The faults, if any, are the authors’ responsibility.

On 8 November 2016, following a public declaration by the Prime Minister, the existing ₹500 and ₹1,000 currency notes in India ceased to be legal tender. In a notification issued by the Ministry of Finance, the initiative was meant to counter a host of factors affecting the economy adversely—black money, hoarding, counterfeit notes, terror financing, among others (Gazette of India 2016). By the end of December 2016, the government brought about a formal closure to the exchange of old notes, unilaterally declaring demonetisation a success. We do not engage with whether demonetisation achieved its professed objectives or not or indeed, whether those objectives were well-founded or not. These issues remain addressed in a growing body of critical literature on the subject (Ghosh, Chandrasekhar and Patnaik 2017; Reddy 2017). Instead, we provide a case of how the initiative triggered its own set of adverse consequences in a segment of the informal markets, much to the detriment of the labouring poor. The enormous economy centred on waste and the embedded recyclables forms the core of our narrative.

In the aftermath of demonetisation (or notebandi in common parlance), the informal markets for waste in Pune witnessed a crisis of their own. In Pimpri–Chinchwad, a part of Pune Metropolitan Region, several waste scrap dealers shut shop on 1 December 2016. For waste pickers, whose livelihoods are linked to the collection, segregation and sale of recyclables, this was as much of a shock as demonetisation. With no avenues for sale, waste ran the risk of becoming non-monetisable, thereby making the underlying labour worthless. Throughout November 2016, waste was getting purchased largely on credit. By the time of the shutdown, the dealers had paid only a fraction of the money due to waste pickers. Following are excerpts from an interview with a scrap dealer on what prompted the shutdown, offering glimpses of the underlying politics that can plague a loosely held informal value chain.

Why did you shut shop?
Because of notebandi, we had no cash. What do you expect us to do? There was no money to pay. Banks were not giving us money. Waste pickers were not taking old notes. They wanted cash in hand.
But why did you prevent other shops from purchasing?
I was not alone. It was a decision of our union. Just as waste pickers have a union, we too have a union. We decided nobody should purchase waste till the money situation became normal. If they [waste pickers] act tough, we can too.
What about the waste pickers? Where should they sell waste?
What can we say about it? They too have to understand. Just as we are dependent [on waste pickers], they are also dependent on us. (Personal interview, 19 January 2017)