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Mixed response to demonetisation, says PHD Chamber president Jiwarajka
Tuesday, 10 January, 2017, 08 : 00 AM [IST]
Our Bureau, New Delhi
Releasing the survey on the demonetisation to remonetisation process,Gopal Jiwarajka, president, PHD Chamber of Commerce and Industry, stated that there was a mixed response fromeconomists, businesses and people.
Eighty-one per cent of the economists who responded cited a significant impact on India’s economic growth in the shorter term,adding that the benefits of demonetisation would help in sustaining economic growth in the longer term.
The questionnaire for the survey, undertaken by the PHD Research Bureau of PHD Chamber of Commerce and Industry in December 2016, was structured.The respondents comprised over 50 economists and analysts, 700 businesses and 2,000 people.
Seventy-three per cent of the respondents in the business segment were facing a huge cash crunch due to demonetisation. They stated that theywere unable to fulfill their daily cash obligations (paying wages to daily wagers and the contractual workforce).
“Production has been impacted directly or indirectly, not only in the unorganised sector, but also in the organised sector,” stated the survey.
Cash-driven segments, such as fruits and vegetable markets, horticulture and floriculture, agricultural and food processing and construction activities, among others, have been impacted.
But the immediate effect would probably be short-lived, and the long-term effect will drive the Indian economy to new areas of growth in the coming times,” said the survey.
“Though the contraction in the gross domestic product (GDP) cannot be ruled out due to the fall in economic activity, the growth in demand will start gaining momentum once the economy moves out of the transition stage between demonetisation and remonetisation,” saidJiwarajka.
“It was expected that the removal of black money from the system would create a good scope for reduction in interest rates via-a-vis lower inflationary expectations and reduce the incidence of direct taxation,” he said.
“While assessing the impact on people, 92 per cent of the respondents said that the major impact of the currency crunch was seen on the daily needs of the people, such as purchasing eatables, dairy products and other necessities,” stated the survey.
Fifty-eight per cent of the respondents stated that they were facing a high level of difficulty in fulfilling their day-to-day activities.
“Eighty-nine per cent of the respondents reported that the unavailability of cash at banks and ATMs was a major hurdle in withdrawing or depositing cash from the banks/ATMs,” said the survey.
“There is a need to set updigital literacy booths outside banks, majorly in rural areas, to spread digital literacy across all sections of the nation,” saidJiwarajka.
The government should incentivise Real Time Gross Settlement (RTGS) andNational Electronic Funds Transfer (NEFT) under the ambit of digital transfers, so that more and more people adopt the available facility and are less dependent on cash transactions.
The threshold limit of Rs 2,00,000 for transactions under the RTGS and Rs50,000 for transfers under NEFT should be exempted from the service tax.
Also, the removal of service tax charged while making payments throughcredit/debit cards or any other payment card up to Rs2,000 in a single transaction is a good start for the transformation of cash transactions to the digital transfers. However, the limit could be revised to Rs10,000.
“The government should print more notes of smaller denominations, such as Rs 50, Rs 100 and Rs 500, so that there is sufficient circulation of money in the market. The government needs to ensure that sufficient quantity of money is being transported to the banks and ATMs in both rural and urban areas on time,”Jiwarajka said.
“There should be a facility of mobile ATMs in government, public sector and private sector offices having more than 25 employees in their establishments,” he added.
“Cash-driven sectors such as the construction sector and small and micro enterprises (SMEs) should be facilitated by expanded cash limits for the payment of salaries of their daily wage and contractual workers,” said Jiwarajka.
“There is a need for low interest rates to propel a boom in housing and real estate. This will substantially increase employment as well as contribute to the growth of the GDP,” he added.
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