How economic wheel is getting stalled

friend working for a multinational company exporting chemicals told me a story of how Demonetisation has hit their sales. For exporting certain chemicals, the firm needs several clearances from the state authorities. At the initial level there is a lowly inspector who issues a certificate; that enables the firm to apply for an export permit. The latter has to pass through four levels in the state excise department going. The papers would not move unless at each level money is passed.

After getting the permit, it is taken to the inspector (who visits the factory often) to satisfy that the there is a valid permit to export. This is almost a recurring monthly exercise. After the demonetisation, the machinery has stopped working and the firm has been advised informally to wait for things to settle down. In the meanwhile, the foreign buyer may switch suppliers due to uncertainty.

A routine transfer of electricity meter supplied by a Distcom in the name of the legal owner of a flat was neither smooth nor simple; After submitting all the documents to the relevant office, an assistant engineer (AE) is supposed to inspect the premises and issue a clearance. Both while submitting the documents and for inducing the AE to conduct the inspection, there are levies. Now it has been conveyed to the applicant that he has to wait for things to settle down.
A real estate developer who builds affordable housing told me another tale of how demonetisation has struck him. As a conscientious person, he tries to follow strictly the compliance requirements. Despite that he has to part with money for getting clearances from the city and state officials.
A member of the city council (elected from the locality) used to send armed money collectors to recover his share. Now the builder cannot hand over the completed apartment and recover his investment from buyers because officials responsible for giving final clearance want to wait and watch.
The big and small businesses have suffered a double whammy. It is not only the sucking out of cash that has broken the businesses across the country. Big and small businesses have to comply with several laws and rules and obtain permits from local and state authorities for carrying on their normal business.
The government officials in key departments like Urban Planning, Excise, Transport, Document Registrar, often conveyed that they have some informal money quotas to send up the administrative and political chain. It is well known that architects and engineers embedded in the Urban Development Authorities can smoothly get the clearance of any building plan. But such concerned officials with whom the businesses have to deal with have apparently stopped moving the relevant papers.
The informal economy in urban and rural area is the backbone of the Indian economy and had worked out comfortable relationships with such political and administrative machinery. The demonetisation of higher value currency has upset such relationships. This new trend of wait and watch approach of the official system intertwined with businesses could stall the economic wheel in innumerable ways.

(S.Narendra, former Information Adviser to PM, Spokesperson of Government of India)



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