Fewer women and girls reportedly entering shelters, but financial hardship is forcing younger girls into sex work and forcing some women to work for free

India’s rupee recall appears to have had “a massive impact” on the country’s human trafficking industry, according to advocacy and rescue groups, with some reporting reductions of up to 90% in the number of women and girls being admitted to their shelters.

But other activists said the illegal trade was already rebounding, and that the financial strain of demonetisation on poor communities was pushing new, younger girls into sex work, and forcing women already in the industry to work for credit or for free.

The Guardian contacted 10 human trafficking advocacy and rescue groups to assess the impact of the Indian government’s shock decision last month to scrap the country’s two most used bank notes.

Women bear the brunt as finances and families are undone by India's cash crisis Read more

The decision, which voided 86% of the currency in circulation in India and has left the country’s informal economy reeling, was justified partly on the basis that it would deprive criminal groups, including traffickers, of their cash stockpiles. But Indians too have been deprived of cash, limited to withdrawals of 2,500 rupees (£30) a day and stymied by long lines at ATMs and outside banks.

Demonetisation complicated every point in the human trafficking supply chain, starting with a “drastic reduction in the number of sex buyers”, said Sunita Krishnan, the co-founder of Prajwala, a Hyderabad-based NGO that rescues victims of sex slavery.

The dearth of customers for sex workers meant “it obviously did not make any sense to induct any new girls in this period”, Krishnan said. “In my shelter home, on average every month 60 to 70 new, rescued victims are admitted. From 8 November [the day demonetisation was announced] in the last 40 days, only six new victims have been admitted.

“I have been on this mission for more than two decades, and this is the first time I’ve seen the entire flesh trade so badly affected.”

There are 18 million people living in slavery in India, according to the 2016 Global Slavery Index, with about 135,000 children believed to be trafficked in the country every year.

Ashok Rajgor, the chief investigation officer at the Rescue Foundation, said no formal surveys had been conducted, “but our operatives in the field have noticed a sharp change”.

Fewer customers for brothels meant that traffickers had less capital to buy and transport women and girls from states such as Jharkhand, Assam and Bihar, all hubs for the trade.

“The market is totally down,” he said. “When you buy a girl, it’s a huge amount of money, maybe 200,000 rupees. It’s really big money and nowadays it’s very difficult to get that kind of cash.”

But he added: “The traffickers will look for other options. It’s too early to say how, but they’ll manage.”

The introduction of a new 2,000-rupee note, while supplies of small change remained scarce, had distorted the market, making younger girls more vulnerable, said Ruchira Gupta, the founder of Apne Aap, an NGO that works with women across Bihar and in Mumbai, Delhi and Kolkata.

“The demand for younger girls is going up,” Gupta said. “Now that [they] have only 2,000 rupee notes, clients don’t want older women, they want virgins and underage girls.”

She said the financial impact of demonetisation had left some women without enough money to buy food and their daughters at risk of being pushed into sex work.

Pimps, who in some red-light districts will take up to 70% of what a sex worker is paid, were beginning to force women to work for credit, she added.

“Women’s debt is increasing. Where we work in [the Delhi red light district] GB Road, I’m being told that brothel managers have started to keep log books, promising to pay the women later,” she said. “These women are being asked to work for free. They have to sleep with as many man as the pimps say just to have a bed and a meal.”

Other women were paid in old, invalid 500 rupee notes. “And the pimps are forcing them to take the money. [The women] have to stand at the bank for hours ever day [to exchange or deposit the notes]. Their income has been dramatically reduced,” she said.

Swati Maliwal, the head of the Delhi Commission for Women, which has been campaigning to have GB Road shut down and the women working there retrained, said her teams had observed similar phenomena. “The exploitation of women on GB Road has increased tremendously because men are coming and not paying them properly,” she said, adding that some women had started sleeping with up to 30 men each day to make ends meet.

Often, trafficked women lacked the identity papers required to set up a bank account to exchange void currency for new notes – meaning some had seen their cash savings wiped out, said Urmi Basu, head of the Kolkata-based New Light Foundation. “There are thousands of women who have no documentation, no bank accounts, apart from a few hundred rupees they tuck under their blouses,” she said.

A “very big slowdown” had been observed in the child labour trade, said Rakesh Singhal, from the NGO Bachpan Bachao Andolan.

He said his organisation – whose founder, Kailash Satyarthi, won the Nobel peace prize in 2014 for his work – had commissioned a study of the impact of demonetisation on the industry.

“But we have observations that show a very big slowdown,” Singhal said. “Most of the placement agencies for children say there is no domestic child labour supply.

“The whole trafficking industry runs on liquid money, you’re paying the whole supply chain, including agents in village areas, who are paying between 5,000 and 10,000 rupees for each child.”

All agreed the decline in the trade was likely to be temporary. “Trafficking is an organised crime, and traffickers and people involved in this crime adapt to newer means whenever there is a change in situations and the external environment,” said Prabhat Kumar, the general manager of Save the Children, India.