Wednesday, March 10, 2010
The Lala's bags of coins
I often wonder how the supply chain of utility works. What happens to things that get used up in the consuming economies and what happens to the surplus. Also, what happens to the things that fall through the cracks. Designers of clothes in America change their lineup for the upcoming seasons and then they show off their new styling. The old clothes go off to their secondary outlets from where they make it out to the liquidation sales outlets. From the liquidation outlets they leave the shores to another country for further liquidation until every single unit is sold out and someone makes incrementally diminishing sums of money on the same. I also wondered what happens to money? Smaller denominations tend to disappear from places and wondered where they'd land up. In cities like Mumbai and Delhi where inflation has soared the cost of goods transactions in smaller coin denominations are rare. The prices of goods are also conveniently rounded off to the nearest higher number to enable a coin-free transaction. So, where do these coins go? I have an interesting story about the same that shows what happens to money. Once I was on a road trip through the state of Uttar Pradesh. I was in a small town near the city of Allahabad. This was a business trip to one of the small time vendors of flavor ingredients. I realize I'm focussing a little more on the fragrance and flavors stories, but, its just occured to me that I must write a little bit about the interesting aspects of business in India. So, I'd heard about the area being totally like the wild wild west with roughnecks and gangsters hovering around every corner. My meeting was with a flavor ingredient manufacturer that lived in a small village about 2 hours south of the city of Allahabad. At first the city of allahabad had a decent Indian city touch, but, as the car in which I was traveling approached the outskirts the evident remnants of poverty stricken India were becoming obvious. It is usually these outskirts of cities that are more impoverished than the villages themselves. There aren't many fancy things in the villages, but, they're usually never dirty mainly due to the scarcity of population and secondly due to the greenery. About two hours after leaving the city, we'd arrived in the small city of Kannauj. Two armed guards opened the doors of the car for me and I was warmly greeted to a tea by the owner of the small flavor shop. The guards kept a precariously unnerving vigil around the area. The scene seemed cut from a godfather flick of the 70's except in rural India. There was no electricity as it seems electricity had bypassed their village, so, a diesel generator was blazing away in the background pelting black smoke in the clear pure air. What amazed me is the bareness of the man's establishment. Mr. Lala (name changed) was a reputed businessman in the flavor ingredient business. He was stocky, dark and bald and had a lot of dirt stuck in his teeth. The red dirt that comes from chewing paan everyday. Lala sat around a one room office behind a large mahagony desk that weighed about a ton. I know because I tried to move it to retrieve a pen that had accidentally fallen under it. Lala made me sit on a simple wooden bench reserved for the visitors while he and his manager/ procurement person sat across the table. A small air-conditioner cooled the air in the limestone washed simple room. A little into our casual conversation about business a boy about 17-18 yrs of age came into the room after knocking. He mentioned to the lala that he needed about two lakhs (~$5000) to give to someone in the neighborhood. The Lala was a little miffed by the demand, but, knew that he didnt really have a choice. He politely asked me to get up from my bench and move away a little. So, I did and the boy just bent around the bench and pulled two bags of something from underneath where I was seated. The bags rang hard of a 'clinking' noise as they were carried away. These were bags of Rs. 1 lakh each made up of coins of different denominations. The boy nonchalantly just took the two bags tied them either ends of a thick rod and put them on the carrier of his bicycle and rode off into the dust. As he turned around the corner I could spot him waiting and signing something on a paper and then turning off to his destination. I wondered what the whole deal was and I enquired the same with the lala. The lala told me that since we 'city' people had stopped using these coins they'd made their way to the villages. Their entire economy was wrested on the heels of this coin exchange. Only very large amounts of money were transacted through paper notes and almost none on checks. Most transactions in cash are done through these bags for two reasons. First, there is a protection fee that they have to pay to the local thugs for letting them freely transport the money and for that the money being transported needs to be clearly visible. A bundle of different notes can be hidden in clothes while being transported and that would lead to non-transparency. The thugs usually charge a small percentage of the transacted amount as a protection fee for them. Secondly, the local banks do not get stashes of currency notes that are under-printed and used by cities. That is what the boy was signing around the corner as he was about to leave one thugs domain and enter the other. He would have to sign two more such 'registers' before he would return and each would settle their accounts with the lala at the end of the month. The bags were wrapped in a laced white cotton cloth that was never used in fabric. The bags were tied with a nylon thread and sealed for value. There was a certain degree of trust in these people about the amonuts of money. I also enquired with the lala if there had been incidents of loot or cheating and he replied in the affirmative. The boy that had worked before this one had once had an argument with a thug over some paperwork and the thug had shot and killed him around the corner. The lala told me about this story that had occurred about a year ago as though it was some petty theft and not some murder. The value of life in these parts of the world is not much. A boy can get shot and killed over an argument and the village will move on.