The Centre’s demonetisation of high-value currency notes had triggered a sharp drop in demand with several sectors recording more than 30 per cent fall in sales since November 8, industry captains told Finance Minister Arun Jaitley in a pre-budget consultation meeting on Saturday.
Urging the government to remonetise the economy as soon as possible by bringing new Rs.500 notes into circulation, industry mooted a stimulus package of sorts to offset the negative impact on job creation and economic growth in the coming quarters.
“There has been an immediate drop in demand as a direct result of demonetisation and though it is recovering from the very drastic drop seen in the early days, companies are still reporting a 30 per cent drop in demand,” CII president Naushad Forbes told The Hindu. He added that though demand would return over time, it depended on how quickly the new Rs.500 notes were brought into circulation.
“There is a need to remonetise the economy as quickly as possible to enable routine small cash transactions, and simultaneously push for as cashless a society as possible,” Dr. Forbes said, mooting a cut in the corporate tax rate to 18 per cent and a fast-track implementation of the government’s stated policy to disinvest public sector enterprises.
Mr. Jaitley, in turn, told India Inc. that this was ‘the new normal’ in the use of cash in the economy and that industry ought to get used to the idea of cheque and e-payment transactions and push for new payment platforms, including those that did not require the use of smartphones.
This would, in one stroke, bring in 500 million people into the electronic payment mode, the minister is learnt to have said.
Calling for greater private investments, especially in the infrastructure sector, Mr. Jaitley said that strong macro and micro-economic indicators, including fiscal discipline, augured well for the future of the economy, adding that the country had achieved a robust growth rate despite a volatile global economy due to the government’s policy measures.
Federation of Indian Exporters’ president S.C. Ralhan flagged the teething problems of the demonetisation ‘reform’ and said paying wages to workers had become a challenge as many were migrants who didn’t have bank accounts in places where they worked. “Those taking small quantities like fruits & vegetables from farmers, handicraft from artisans or sending goods for job work are also reporting the same problem.
The transportation of raw material and finished goods has also been delayed,” Mr. Ralhan said, asking for a hike in the cash withdrawal limits from banks.
“The demonetization drive has brought down economic activity drastically across all sectors and growth will remain muted at least for Q3 & Q4,” Assocham president Sunil Kanoria said. “To offset this, it is imperative to rationalize direct and indirect tax rates in order to boost economic activity.”
