Demonetization Woes (9) - Kathiawadi Angadias work around

(via Sunny Narang)

Kathiawadi Angadias : The Lifeline of Gujarat's World's Diamond Domination : Nothing will stop Cash in Indian Economy

As of November 8th , after PM Modi's speech , the most powerful community of diamond,cash and jewelry couriers , the traditional Kathiawadi angadias has hundreds , if not thousands of crores of old money. 

Angadias are the nucleus of India’s rural and urban cash transactions and are central to the functioning of the cash economy. Last year, Mumbai tax authorities detained some angadias and demanded that they open their bags. The messengers refused, and angadias staged a wildcat strike. Pressure from crippled diamond merchants forced the government to retreat within days.

All the diamond traders of Gujarat were shocked , even the most "White" ones have a certain percentage in "Black" , at least 20% . What will happen to our cash in transit ?

"These agents, popular with Gujarati traders in Mumbai, have however managed to devise a new strategy within 24 hours to bail themselves out and keep operating as they have been for decades now.

Even though most of them were on a Diwali vacation, visiting their hometowns, it took them less than 24 hours since the Prime Minister's late night address about demonetisation of Rs 500 and Rs 1,000 notes to come up with a way to survive.

Angadias deal in currency notes of high denominations only as their amount varies from as low as Rs 10,000 to several lakhs. There are at least 100 such operators in Mumbai, taking the total turnover of this mode of business into several crores. These Angadias charge a small fee, say around Rs 100-Rs 200 per lakh rupees, or an equivalent value.

"We only have notes of high denominations as it is easier to carry maximum cash. First we will have to do away with existing stock of notes," said a trader.

Another operator shared, "We will ask the recipient to either accept money in Rs 500 and Rs 1,000 denominations or we will return their cash to the sender. This will ensure we are left with least of such currency notes as even the receiver will take delivery from us or else he will fear non-payment of his dues (from the sender) for some months from now."

In the next few days, as the new notes start getting circulated, only cash in new notes of high denominations will be accepted. This will help in phasing out the old notes that are not legally acceptable in the market, but only at banks and post offices.

"Having notes of Rs 2,000 denomination will make our business operations easier. It means we can carry more money or our parcel weight can become lighter for the same amount that it used to take for Rs 1,000 denominations," opined a trader.

Once they begin operations from November 12-15 onwards, their prime agenda will be to clear old high denomination notes, but insiders state that it will take around 3-4 months for them to regain the lost business. Thus, though high value transactions may become difficult during the next couple of months, by the end of this financial year, it will be business as usual for them."

"As of today, the angadias’ future is under threat. Will the cash economy see a revival or will Modi be successful in doing away with black money? 

 Half the money they carry, after all, is sarkari money. The system is being carried out today as it was decades ago and no matter what happens, it will be the same for the future. It will be a blue moon before India becomes a cashless economy.

And where there is cash, there will always be angadias."

http://www.arre.co.in/people/black-money-demonetisation-narendra-modi-india-angadia/

In 2002 India Today featured Angadias as one of the "Things that make India Proud" :

"It is a matter of great surprise to anybody except those in India's diamond trade that in this age of distrust and suspicion, the Angadia system can even exist.Diamond traders routinely send crores of rupees worth of diamonds from Ahmedabad to Surat, from Surat to any town in Gujarat or on to Mumbai, the country's diamond trading hub with an Angadia, a door-to-door service, without any receipt or record of transfer. Angadia firms even ferry cash.

Gujarat has practised the system for nearly 300 years. It grew out of the need for traders to transport vast sums of cash and valuables such as textiles and diamonds from one town to another or to Mumbai, seen as an extension of Gujarat."

http://indiatoday.intoday.in/story/things-that-make-india-proud-angadias/1/218938.html

The legality of angadias, the unofficial network of banking and courier services, might be questionable. However, the dependence of the diamond industry on these is unquestionable.

For instance, when angadia services take a 15-day vacation during Diwali, many diamond traders declare holidays. “They have become the heart of the industry, in transporting goods between Mumbai and Gujarat,” said a former president of the Surat Diamond Association (SDA).

 Insiders revealed Rs 200-250 crore worth of cash and ‘parcels’ are transported between Gujarat and Mumbai daily. Of this, Rs 100-150 crore are believed to be diamond and jewellery consignments for the industry in Surat and Ahmedabad.

In fact, the amounts could be much more — the unorganised nature of their business makes it difficult to get the exact number, said the proprietor of a jewellery firm. Of course, the other side of this courier network is that it is used for hawala or other “unofficial” remittances, from abroad or domestic sources. However, many simply choose to take this route because of the efficiency and secrecy.

Industry estimates suggest of the 10,000 diamond polishing and cutting units in Surat, only 10 per cent or 1,000 units would be using the official way to transport goods and cash. “Small unit owners do not understand the legalities attached to official transactions. They find the angadia more convenient and quick. Also, movement of precious diamonds is risky for individuals; the angadia are professionally trained for this,” said another diamond trader and exporter.

Way before software , was India's domination in diamond polishing and trading .

And to understand how a small cottage industry in arid Gujarat , run majorly by two castes of Palanpuri Jains and Kathiawadi Patels beat the Jewish domination is a amazing story of enterprise , innovation and vision by the Informal Industry of India . 

As far back as 2003 Wall Street Journal reports :

"In the global diamond world, Indians have been so successful that they are challenging Jewish dealers, even in Tel Aviv. About 80% of all polished diamonds sold world-wide pass through Indian hands. In Antwerp, Indians' share of the $26 billion-a-year  diamond revenues has grown to roughly 65% from about 25% in the past 20 years, while the Jewish share has fallen to about 25% from 70%, according to both Indian and Jewish consultants who study the global-diamond trade."

The diamond industry cannot enforce written contracts – diamonds are easily portable, universally valuable and virtually untraceable, and state courts are incapable of enforcing executory contracts for diamond sales. It operates on credit, relies on trust, and hence favours tightly knit community and family-based business networks. The Orthodox Jewish community in Antwerp had long relied on the effective social control mechanisms of their community in order to ensure trust, with anyone seeking to cheat seeing their reputation and hence ability to do business quickly destroyed. Gujarati business communities operate along similar lines, with strong family networks and a high incidence of marriage within their ethnic group. In the Gujarati case however, an additional source of community cohesion, support and solidarity comes from their caste community.

The success behind India's lucrative diamond processing business are the Palanpuri Jains, natives of Palanpur village in Banaskantha district in Gujarat. People of this close-knit community of Palanpuri town have been actively involved in the diamond business for years carrying on their legacy of secrecy, honesty and informality and have built this highly expensive and risky business based on trust without any written agreement. Diamonds worth millions of dollars are traded on mere handshake, just verbal agreement, surprisingly with minimum security which is an impossible thing in western countries where heists occur frequently in downtown business areas. 

The highly successful people have set up diamond polishing, cutting and sales centers in Antwerp, Belgium, Tel Aviv, Israel, USA and China. Surat is indisputably a major diamond cutting center in the world handling any size from less than 5 points to 5 carats besides bigger stones. The Surat center has been processing unpolished bigger diamonds in the past few years. The Palanpuri Jains have turned the scattered cottage industries into a lacs of crores  enterprise.   

Jains  began to arrive in Antwerp in 1970s, the world’s biggest trading hub for rough diamonds and  their first foray into Antwerp was  based on capital and prior experience on the polishing side of the diamond trade in India. Antwerp, the world's gem city where raw diamonds are traded, has 60 percent Indians in the cut and polished diamond trade and most of them are Palanpuri Jains. Previously the industry  was dominated by Jewish traders.

The Gujarati Jains took advantage of two key factors to enter into the closed world of Antwerp’s diamond industry: they started to specialise in smaller, lower-value stones, and used the cheap labour and excellent skill of Surat’s diamond cutters and polishers to produce diamonds that had larger market potential. Thus, Gujaratis were able, as one trader put it: “to polish in rupees and sell in dollars”.

Polishing the dust, or small diamonds 100 pieces in one carat, in the Antwerp gem market was ignored by Europeans as they were not familiar with that delicate work. Palanpuri jains developed special technique to convert unpolished diamond dust to valuable diamond pieces of dazzling beauty.The jain merchants bought the diamond dust in bulk and had them processed in Surat,India where the labor costs are cheaper and this has given them the added advantage over others in the competitive world of diamond trading at Antwerp. The finished diamonds are traded in Antwerp.

'Derasar', or a Jain temple of Antwerp built by the Jain Community is believed to be the biggest and costliest temple of the world with gems studded in its walls. 
 
The Kathiawadi Patels form yet another Gujarati community and are equally competent diamond traders whose foray into diamond industry was late and now they have their own diamond processing factories in Surat and trading offices in Antwerp.

When we speak about Gujaratis in the diamond industry in Antwerp, we are in fact referring to just two communities which have come to dominate the trade – the Palanpuri Jains and the Kathiawadi Patels. The latter are a community that in just one generation has distinguished itself with a dizzying rate of social mobility. 

The Kathiawadi Patels were once agricultural labourers who moved to Surat (Gurjarat’s diamond polishing centre), in order to escape drought. They started off as cutters and polishers, but quickly moved up the ranks and over time accumulated enough capital to open their own factories. They were able to use their contacts with Palanpuri Jains in order to first establish themselves in Antwerp. Once they did, they rapidly expanded and now rival the Jain Gujarati traders there.

Who are the Angadias ? 

Reliable, fast, efficient and trustworthy are the characteristics of angadias. In layman’s term, they run unofficial courier-cum-banking service and many businessmen who operate and transact between Mumbai and Gujarat, prefer angadias. Businessmen feel that angadias are more secure than online money transfer.

They transfer cash and jewellery from Mumbai to metros like New Delhi, Kolkata and Chennai and the system remains sound and robust. Not all money transferred is black and businessmen prefer it for speed but the line is wafer thin.

Through the angadia service several crores are transferred, the bulk is between Mumbai and Ahmedabad, Vadodara, Rajkot, Surat, Navsari and other places in Gujarat. Most angadias are from the Kathiawar region in Gujarat and have been in the business for a long time. Since Independence, the angadias are the mainstay of transacting money, jewellery, gold, diamonds, precious stones.

Government agencies, including police, Income Tax, Directorate of Revenue Intelligence, Enforcement Directorate and intelligence agencies, know about the business and generally prefer not to trouble them. “We have built our business purely on trust; something diamond merchants would vouch for. People who transfer cash prefer us. We take risks and our charges are reasonable. In fact, businessmen have relied and continue to rely on us,” said an angadia, speaking to Deccan Herald on condition of anonymity.

The angadia service started in the pre-Independence era and gained momentum in the 50s and 60s. “In the 70s, it was well-organised and well-trusted like any other business,” said the angadia. “They transfer money, diamonds and jewellery – in a maximum 24 hours and charge a small fee – generally Rs 100 for transfer of Rs 1 lakh or value. 

Generally, the sender and the recipient decide on a code. The sender takes a code from the recipient – which is generally the serial number of a currency note. Then the sender tells the angadia– who in turn informs the recipient. Subsequently, it is delivered and the note bearing that currency number is taken as a proof of delivery. Sometimes the telephone number is also used  and the money is delivered when the recipient gives a missed call.

The physical delivery of cash or diamonds takes place on a daily basis. Generally, they go by the Gujarat Mail and return the next day. At least 25 to 50 per cent of seats on two coaches of this train are booked by the angadias. For security, they travel in groups. “This is for safety and security,” said an angadia. They keep a “low profile” and prefer wearing “normal clothes”. “We do everything to avoid suspicion,” said one of them.

Besides mutual trust and respect, angadias do not ask the sender whether it is legal or illegal money. “Sending huge amounts of money through official channels like money order or direct bank transfer is not possible as it would come to the notice of taxmen. Hence, this is transfer through unofficial means, often termed hawala transaction, but again the line is very thin and every paisa that is transferred does not fall in the ambit of hawala money,” sources said. 

	8:39 PM (19 minutes ago)