I want to make one thing clear. There is a difference in between “short-term inconvenience” or pain or difficulty, however you want to call it, and a welfare shock.
Take a very simple empiric: 80% of families in India that are above the poverty line in one year but fall below it in another, do so because of one illness, to one family member, in one year. Let that sink in please: one, one, one. That’s it. (see Aniruddh Krishna’s excellent ‘One Illness Away‘ to read more). This is the reality of the vulnerability of what is so dismissively called the “cash economy.” You can replace illness with wedding or funeral and the story still holds. Welfare shocks, as they are called, break cycles of very tenuous security and small economic gains, pushing families back into cycles of debt and depleted savings. They do it because we don’t have enough public welfare protections to guard against small risks and life events – domestic savings are the only floor.
The thing about demonetisation done in this way, where no planning accounts for the “short-term” contraction of the cash economy in a place where 60-80% of workers work informally, half get paid in cash, and one in every five of them work in cash on daily/weekly wages (see RBI, NSS data, or the NCEUS report on the unorganised sector), then you aren’t pushing a “short-term inconvenience,” you risk causing a welfare shock.
KAFILA - COLLECTIVE EXPLORATIONS SINCE 2006 