Cost of queues to exchange currency is an estimated Rs.150 billion

by Mahesh Vyas

What is the cost of people standing in a queue to change old currency notes with new ones or to deposit old currency notes into banks or to get new currency notes for use?

If people were not to stand in queues they would be doing some productive work that would help them earn some wages. Since they are forced to stand in queues they effectively lose wages for the period. This loss of wages is the predominant cost of people standing in queues to exchange old currency notes into new ones.

To estimate this loss of wages, we first estimate the average daily income of an individual. According to CMIE’s Consumer Pyramids data, India’s employed population is 407 million and the annual income of all households is about Rs.53 trillion. This yields an average daily income of Rs.435 per employed person. We assume that 75 per cent of this is wages. Thus, what is at stake in those queues is Rs.327 per day per person, on an average.

Next, we estimate the number of persons who spend time in the queues. There are two ways to approach this. In the first method, we assume that effectively every working person has to stand in a queue for about eight hours during the entire period of the liquidity crunch. That means 407 million man-days would be spent in standing in queues to get liquidity.

An alternate way to estimate the man-days in queues is to assume that on an average 40 persons stand in a queue in front of about 137,000 bank branches, 20 persons queue-up at about 70,000 rural post offices (half of the total of 139,222) and 30 persons are in line at about 60 per cent of the 200,000 ATMs (since they often do not have cash) during the 50-day window. This works out to 510 million man-days.

This is a much higher estimate than 407 million man-days based on one man-day invested in queues per employed person during the 50-day period.

For our calculations we take an average of the two methods and come to an estimate of 458 million man-days that are estimated to be in queue during the 50-day period to exchange currency, deposit cash or make withdrawal as per limits allowed. The cost therefore works out to the Rs.150 billion. This includes the expenditure on photocopying of identity proofs required for the transactions. It does not include any other incidental cost such as travel, etc.

The financial cost cannot take into account the loss in production because these people were in the queues or the pain, irritation and anxieties that the individuals suffer. It also does not include the cost to the environment caused by making photocopies on 25 million sheets of paper.

CMIE STATISTICS
Unemployment Rate
Per cent
6.0 -0.1
Consumer Sentiments Index
Base September-December 2015
97.5 -0.4
Consumer Expectations Index
Base September-December 2015
98.0 -0.6
Current Economic Conditions Index
Base September-December 2015
96.8 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Mar 16 Jun 16 Sep 16 Dec 16
New projects 3.29 1.55 2.29 1.38
Completed projects 2.26 0.90 2.15 0.71
Stalled projects 1.04 1.27 0.35 0.42
Revived projects 0.63 0.38 0.51 0.17
Implementation stalled projects 0.92 0.50 0.57 0.79
Updated on: 20 Jan 2017 9:30AM
Quarterly Financials of Listed Companies
(% change) Dec 15 Mar 16 Jun 16 Sep 16
All listed Companies
 Income -5.1 -0.2 -0.9 2.0
 Expenses -4.8 0.9 -0.4 1.7
 Net profit -2.5 -29.1 -3.3 15.4
 PAT margin (%) 4.7 4.9 6.9 7.1
 Count of Cos. 4,432 4,347 4,297 4,201
Non-financial Companies
 Income -7.8 -2.1 -2.5 0.4
 Expenses -9.2 -3.9 -2.9 -0.3
 Net profit 44.6 4.9 10.3 25.3
 PAT margin (%) 5.5 6.2 7.4 7.0
 Net fixed assets 3.8 -8.6
 Current assets 3.1 8.4
 Current liabilities 10.6 11.2
 Borrowings 6.6 3.3
 Reserves & surplus 7.8 8.4
 Count of Cos. 3,486 3,430 3,398 3,323
Numbers are net of P&E
Updated on: 20 Jan 2017 9:38AM
Annual Financials of All Companies
(% change) FY13 FY14 FY15 FY16
All Companies
 Income 11.6 9.0 3.9 -0.2
 Expenses 11.8 9.0 3.9 -0.1
 Net profit -0.1 -3.9 1.5 -11.5
 PAT margin (%) 3.6 3.2 3.3 3.6
 Assets 14.0 12.1 8.8 7.6
 Net worth 9.4 9.3 8.1 6.1
 RONW (%) 6.8 6.1 6.1 5.8
 Count of Cos. 22,526 19,648 18,100 13,336
Non-financial Companies
 Income 10.7 8.5 2.8 -1.6
 Expenses 11.0 8.2 2.9 -2.6
 Net profit -10.6 -5.3 -5.8 15.6
 PAT margin (%) 2.4 2.1 2.2 3.3
 Net fixed assets 13.4 10.4 12.3 10.3
 Net worth 7.6 8.1 6.5 5.1
 RONW (%) 5.4 4.8 4.7 6.3
 Debt / Equity (times) 1.1 1.1 1.1 1.0
 Interest cover (times) 2.0 1.9 1.9 2.2
 Net working capital cycle (days) 69 69 68 68
 Count of Cos. 17,229 15,331 14,111 10,567
Numbers are net of P&E
Updated on: 20 Jan 2017 9:51AM

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