“The Informal Sector Will Be Mostly Finished”: Aruna Roy Discusses Demonetisation And Its Effects On Rural India

31 December 2016
Aruna Roy, founder of the Mazdoor Kisan Shakti Sanghatan.
Ramesh Pathania/ Mint/Hindustan Times
Aruna Roy, founder of the Mazdoor Kisan Shakti Sanghatan.
Ramesh Pathania/ Mint/Hindustan Times

Since 8 November 2016, when Prime Minister Narendra Modi announced that notes of Rs 500 and Rs 1,000 would no longer be legal tender, the government has been steadfast in its defence of the policy, which catapulted the nation into chaos. However, several economists and social activists have questioned the rationale behind the decision and criticised it. One such activist is Aruna Roy, the founder of the Mazdoor Kisan Shakti Sanghatan. The MKSS is a grassroots organisation in Rajasthan, which was formed in 1990. Since its inception, it has been working with the rural poor in Rajasthan on issues such as minimum wages and organising jan sunwais, or public hearings, of farmers, daily wage labourers and government officials. The organisation, with Roy at its helm, also drove the successful movement for the need to access public records that led to the enactment of the Right to Information Act in 2005.

On 17 November, a group of social activists, economists, and academicians, including Roy, issued a statement raising several questions about the demonetisation policy. In the statement, the collective deemed the introduction of the 2,000-rupee note as “inexplicable,” given the government’s rhetoric about high-value currency being used to hoard black money. They condemned the government for not taking into account the fact that a significant portion of the Indian population does not have access to the banking system. The signatories also pointed out that the distribution of banks in India is highly skewed, with a third of all bank branches being spread out in only 60 tier-1 and tier-2 cities and towns. The statement emphasised that people in rural India, who often suffer from inadequate information, have become the worst victims of demonetisation.

On 26 December—ahead of a public meeting that the MKSS was going to conduct on demonetisation in Beawar, Rajasthan—Kedar Nagarajan, a web reporter with The Caravan, spoke to Roy about the policy and later continued the conversation over email. Nagarajan and Roy discussed the impact of demonetisation on the rural informal sector, the disruption it has caused to the work of the MKSS and the current government’s conflicted approach towards the issue of black money.

Kedar Nagarajan: What are the likely impacts this policy will have on the informal sector in the short term and the long term?

Aruna Roy: The informal sector will be mostly finished. [According to the Economic Survey of 2007-08,] 93 percent of the Indian workforce is in the informal sector. Many of the people who work in this sector live from hand to mouth, and cannot handle a situation where their access to cash is squeezed and cut off.  Workers in this sector depend on daily work payments and cash transactions. This will also have a direct detrimental impact on the small and medium-scale industries that support the informal sector. The impact will eventually be felt right down the line acting like a forced recession that will take months to restart.

Kedar Nagarajan is a web reporter at The Caravan.

Keywords: Aruna Roy demonetisation MKSS mazdoor kisan shakti sanghatan