Consequences Of Demonetization

Posted by Ashok Kumar
December 22, 2016

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The Prime Minister of our country took a decision in a hasty way on 8th November 2016. The Prime Ministerial post is a constitutional post under Article 75 of the Constitution(Constitution, 2014). The debate is not about implementing this decision of demonetizing the old denomination notes but most important thing is that the government did not think for a single moment about informal nature of our economy. The proportion of informal sector in our country is more than 93 percent(NCEUS, 2009).

The large proportion of workers in the informal sector is owing to the poor condition of the Indian economy. The magic figure of growth rate is around 7 percent as Prime Minster used to say while roaming around the top economies of the world. As soon as the NDA(National Democratic Alliance) government came to power in 2014, amended the method of measurement of GDP(Gross Domestic Product). The base year of the national income measurement was changed from 2004-05 to 2011-12. They campaigned of world’s fastest growing economy with merely changing the figures. Yes, we are fastest growing but not top most fast growing economy in the world.

Now we must understand how this demonetization decision will affect the workforce engaged in the informal sector. The nature of the transaction in informal sector happens in cash only. The workers of the of the informal sector work in sectors like construction, sweeping, cleaning, driving, gardener, agriculture, delivery of e-commerce giants etc. They earn in denominations of less than 500 rupees. Now the nonavailability of cash in denominations of 500 will force the employer to hire someone who can accept the cashless payment.

The decision may force the employer to contact the contractor. The contractor will take the commission as he/she is a mediator between the workers and the employer. so we can say that this decision will promote the contractualzization of the workers. The contract work does not offer any social security benefits to the informal sector workers.


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