Madhav Sharma | Jan 8, 2019 | 5 min read
Jaipur: Thirty-five-year-old Neetu Devi carries wheat in her saree’s pallu and places it on the counter of Ramswaroop Sharma’s shop. He weighs the wheat -- it measures slightly less than 250 gm -- prices it at Rs 4 and in exchange, hands over two matchboxes and a candle to her. The transaction is now complete.
In a world where terms like Paytm, Google Pay and Internet banking are freely thrown around, residents of villages like Ladore Khurd, Ledor Kalan, Bahrai, Mengra and Hakimpura, in Rajasthan’s Karauli district have been engaging in the barter or commodity exchange system for more than 100 years.
Picture this scenario: Customer A has 1 kg wheat, and seeks to buy sugar. A goes to shopkeeper B and requests to exchange their wheat for sugar. Under this commodity exchange system, B purchases the wheat -- for a price lower than the market rate -- and hands over 1 kg of sugar. In the market, price of wheat is currently lower than that of sugar. B later sells this wheat at market price, or higher, making a profit.
This system works well since agriculture is the primary occupation across these villages. The lack of cash within their economic circles has led residents to exchange home-grown grain for ration.
Neetu, from Ladore Kalan village, comes from a small family of labourers. In lieu shortage of cash, her family grows grain on their own farms and exchanges it for ration in the market. She explains that because of poverty and unstable employment, household goods like sugar, oil and kerosene are purchased by exchanging grains like wheat, millet, mustard and sesame. When asked about ‘digital economy’, Neetu says she has heard of the term, but isn’t aware of its meaning.
Sharma runs a small shop, selling vegetables, mustard oil, kerosene and other items. In exchange for these items, he earns food grain worth 100 kg every month, which he later sells in the market.
Mukesh Jadoun has been running a small grocery shop for 10 years in Ledor Khurd village. He says it is commonplace for residents to engage in barter system. “Small shopkeepers like us get a little more profit in this. We buy grain at less than market price from villagers, sell it in the market at a higher prices and earn profit,” he explains, adding that he gets more than 100 kg grain every month through this business system.
Shankar Singh, a social worker from Rajsamand district, says, “Apart from Karauli, this system is practiced in tribal areas of Udaipur as well.” He adds that the barter system isn’t phased out completely even though its prevalence has reduced over the last decade.
Impact of demonetisation
While most of the country’s 1.3 billion people were left hanging after the Modi government banned Rs 500 and Rs 1,000 notes on October 8, 2016, life across these villages continued seemingly unaffected; Demonetisation only accelerated the commodity exchange system residents engage in. Moreover, there are no banks or ATMs in any of the villages in Karauli district, and a singular bank resides in the main district area. This makes it difficult for bank account holders to regularly travel back and forth to withdraw cash.
Raghuveer Singh Punia, a Jaipur-based chartered accountant, says rural areas were worst affected by demonetisation, as most transactions and payment for services take place generally with cash. “Due to decreasing cash, people started fulfilling their daily needs through barter system. Second, the number of banks in rural areas is less. People from villages come to the city once or twice a month for bank work,” he explains.
Post-demonetisation, Mukesh claims the barter system “swiftly increased” and now has reduced “slightly”. He says, “At the time of note ban, almost everyone from the village bought goods by exchanging grain. During those few months, I earned around seven to eight sacks of cereal. Today as well, I get around one-two sacks of grain every month.”
Deena Sharma, from Bahrai village, says even until 10 years ago for purchase of items like vegetables and other daily use products, exchange of goods took place. She also adds that 2016’s note ban increased this activity. Bhawna Devi, sarpanch of Khedia village, concurs and says it is a common, traditional system, which accelerated after demonetisation.
Nesar Ahmed, senior analyst at the Rajasthan Centre for Budget Analysis, also believes that demonetisation accelerated barter trade -- “Before currency, barter was a way of trading. Now, when people did not have enough cash after demonetisation, they looked at other options and barter was the easiest. That is why it has been seen that the tradition of commodity exchange has come alive after demonetisation. While most villagers did not have cash, the ones who did found no use for it, and the best resort was barter system.”
Pinty Sharma, a shopkeeper in Hakimpura, explains that this economic system is not just business but a “symbol of faith” as well, as it creates a level of trust between the customer and shopkeeper. “After the ban on notes, this belief has increased,” he adds.
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