Sowing season hit by demonetisation: Central team red-flag loss of rural jobs

NEW DELHI: The 81 bureaucrats, who were dispatched by the Centre in teams of three to study the impact of demonetisation on the ground, have red-flagged loss of livelihood in rural areas, particularly in the non-formal sectors, and highlighted the negative impact on the farm sector in the sowing season.

Officials told ET that these confidential reports were submitted last week and are now being examined for further action. These teams, each led by an Additional Secretary, were sent off on November 18.

A number of reports, officials disclosed, have observed that the main problem is not the lack of cash in the system but shortage of lower denomination notes. Many have suggested to immediately rush small denomination currency notes to rural areas, relax norms at district cooperative banks and aggressively pursue the public campaign to go cashless. ET has accessed key findings of some of the states:

TELANGANA
The report records that the state’s rural economy has been badly hit with “extensive loss of livelihood”. Based on local Nabard inputs, the team has pointed out that agricultural produce is selling at lower cost in the absence of cash and wealthier farmers are not bringing produce to the market at all.

While weather conditions are favourable for sowing, the report has pointed out that no one has “yet moved for Rabi crop operations”.

While business establishments in rural areas are open, their operations are down. The report has forecast further losses in the coming months. The team found sharp decline in business of small traders and vendors though they remain functional. The local powerloom industry has also taken a major hit. The second and third tier workers of this economy largely function on cash and have been worst hit.

The overall state finances have seen a drastic fall. The excise revenue, stamp duty, commercial taxes, transport sector revenue have all registered a decline hitting the state by Rs 3,000 crore.

The report states that there is a “scarcity psychosis” among people leading to hoarding of Rs 100 notes, which is having an adverse impact on liquidity. On the plus side, banks in the state have conveyed that their NPAs have come down by almost 30% and many gold loans are getting repaid.

They have also recorded a marked increase in deposits in Jan Dhan accounts. However, credit offtake from banks has seen a dramatic decrease despite the Rabi season.

The team has recommended that instead of printing `2,000 notes, currency notes of `500 and `100 should be quickly printed and disbursed to increase liquidity. For farmers, the report suggests old currency must be permitted for use without limit to buy fertilisers, seeds and agricultural inputs.

The team wants a ‘cash as a last resort’ campaign be started.

KARNATAKA
Here, the general response has been better but the team found panic withdrawal of currency notes from the market. ET has gathered that the report highlights massive short supply of new currency notes. If not made good by month-end, the team feels difficulties may compound, particularly among the salaried class.

Again, the observations is that nonfunctioning of cooperative banks could hit farmers adversely. The report has suggested these entities be treated at par with regular banks to ease the pressure in the rural areas.

It has suggested first priority must be given to rural areas for cash flow facilitation. On the positive side, the report has indicated that the urban areas are better off as the ATM-topopulation coverage is quite good in most cities. Daily wagers in cities, however, have been badly hit.

TAMIL NADU
While highlighting some of the common problems, the team here also has asked to bring in lower denomination notes immediately for an early resolution.

Re-operationalisation of cooperative banks is another suggestion. The report has noted that there is distress on the ground but the government still has a time window to address this problem.