Meaningful government interventions and corrective measures initiated from time to time considerably helped the State’s economy to handle the damage inflicted by the demonetisation drive.
Kerala is perhaps one State that had recovered fast from the ravages caused by the sudden withdrawal of liquidity and expropriation of the spending capacity of the common man.
But a stock-taking of the situation post-November brings to light the impact of the decision on the State’s economy.
The small, medium and unorganised sectors and the cooperative banking sector were battered by the move. In a State noted for predominant cash transactions, cash-intensive sectors such as retail trade, hotels, restaurants and transportation that account for about 40% and the primary sector that accounts for 16% of the economy were the worst affected. Curtailment of cash payments and curbs imposed on banking operations, especially the cooperative network, had a great bearing on the travails of the common man.
It was in this context that the State Planning Board appointed an expert committee headed by C.P. Chandrasekhar to gauge the impact of the decision and prescribe a way out of the crisis. Chief Minister Pinarayi Vijayan and his Cabinet colleagues also launched a strong political protest by staging a protest before the Reserve Bank of India here. This movement led by the Chief Minister also captured attention.
According to economist D. Narayana, who was a member of the committee, the government decision to assess the damage and explore solutions was the first major step that helped to ease the crisis. Finance Minister T.M. Thomas Isaac’s decision to increase capital expenditure also gave a major impetus to the economy.
“Kerala set a model for other States by forming the committee and also floating the Kerala Infrastructure Investment Fund Board to boost public spending. This, as well as a slew of other laudable measures, helped the State to overcome the crisis. Migrant workers who had left the State for want of jobs have returned and the State’s cooperative banking sector has also come back on rails. The resolve to boost capital expenditure was commendable,” he says.
The government bid to ensure cash disbursal to meet the salary and pensions also won public approval. The expert panel that conducted exhaustive studies to assess the damage inflicted in various sectors dwelt at length on the trust enjoyed by the deep-rooted cooperative banking network. They also helped expose the hype on digital payments and its lack of traction in a cash-intensive economy. Its recommendation that the State government should provide a guarantee for transactions by primary lending societies was implemented.
The committee also predicted that despite all the pain, the stated objectives of the exercise may not be achieved and said it would not be a panacea to check black money and those points continue to be debated too.
