An agribusiness perspective of demonetization in central region of the state of Gujarat in India

Abstract

This paper aims at understanding the effect of demonetization announced in November 2016 on agribusiness subsystems, its effect on consumer purchasing criteria, and the problems that surfaced in rural areas to move towards digitalization. This research was exploratory in nature and so adopted an open-ended approach through interviews of 200 farmers selected from 20 villages of two districts; one economically progressive and the other economically backward, in central region of the state of Gujarat in India. Besides, 50 landless farm laborers, 12 input dealers, 20 wholesalers, 20 retailers, 4 each of processors, exporters, and logistic service providers operating in study area were also interviewed. The focus group discussions were also conducted. Secondary data were gathered from various government sources. Exploratory factor analysis was conducted to examine the consumer purchasing criteria. Garrett’s ranking technique was used to find the problems of moving to digital transaction. The production activity slowed down due to immediate cash crunch. Agriculture also suffered a setback. Socio-economic factors contributed strongly to the consumer purchasing criteria post-demonetization. The rural economy worked on local credit basis during the demonetization period. Delayed sowing was observed due to non-availability of inputs during initial days of announcement of demonetization. Farm labor suffered losses. Prices of perishables crashed. More bank accounts opened in rural area as dairy payments were made mandatory through electronic mode only. Infrastructural bottlenecks, complex e-banking language and lack of technical knowhow, etc., posed problems before the rural economy to go digital. Strong policy interventions were suggested to make digitalization more popular in rural areas. Removal of infrastructural bottlenecks was suggested to absorb the shock effects of announcements like demonetization.

Influence of demonetization on various sectors of the Indian economy

“…The reports of RBI indicate that post-demonetization, there has been a sharp rise in the number of accounts (272,000 Million to 728,340 Million) under the Pradhan Mantri Jan Dhan Yojana (PMJDY) and a surge in digital transactions (RBI, 2017;Fouillet, Guérin & Servet, 2021;Jawed et al, 2019). However, Singh & Prajapati (2020) found that infrastructural bottlenecks (less availability of bank branches, agricultural credit society, and ATMs) were perceived as hindrances to encouraging digital transactions. Hence, there is a long way to promote digitalization catering to all small sections of Indian states.…”

“…On the other hand, some economists such as Paul Krugman, Manmohan Singh, Amartya Sen, P Chidambaram Kaushik Basu, Jean Dre`ze, Jayati Ghosh, Prabhat Patnaik, Arun Kumar, and Larry Summers did not consider this policy commendable (Jawed et al, 2019;Mohindra & Mukherjee, 2018). Singh & Prajapati (2020) Demonetization has been used worldwide as an effective tool to curb black money. It was used in economies where most economic activities were handled in high denomination bills (Lahiri, 2020).…”

Understanding the ease of doing agribusiness in emerging Asian economies: evidence from world enterprises survey

“…Several foreign firms are attracting to the Indian food market; they collaborate with Indian firms to expand their business and look for development opportunities for themselves (Shah et al , 2020). The researcher suggested that foreign direct investment (FDI) growth is driven by introducing reform in business such as the simple approval process of various licenses, open restricted sector for foreign investors and transparent tax administration system (Singh and Prajapati, 2020). With time, agribusiness marketing and trade dynamics have changed immensely over the years; however, the extent of change that agribusiness has seen over the years has not been able to match the desired level in countries such as India, China and Pakistan, especially (McMichael, 2020; Rehman et al , 2015).…”