Modi's cash ban hits US$1 trillion hidden economy

Mumbai

IN Prime Minister Narendra Modi's political base of Varanasi, Hinduism's holiest city, weaver Zainul Abedin stares at the uneven mud floor of his home. Behind him, more than a dozen handlooms lie idle.

Mr Abedin is part of the collateral damage of Mr Modi's Nov 8 decision to ban high-value currency notes, effectively cancelling 86 per cent of cash in circulation. The move was designed to stifle corruption and tax evasion, but many of the hardest-hit are workers in India's vast and intricate informal economy - the small businesses, shops, drivers and countless other basic industries and services that employ more than 90 per cent of Indian workers.

Most are poor like Mr Abedin, who earns 250 rupees (S$5.30) a day, but collectively they account for almost half the economy. That's some US$1 trillion, or more than the GDP (gross domestic product) of Indonesia. "Modi's cash ban has broken our backs," said Mr Abedin, 39, who makes Varanasi's famous silk fabrics, shot with gold and silver, and says he can no longer feed his children. "We weavers won't last i…