A united Opposition persisted with its bellicosity and forced a washout of both Houses of Parliament for the fourth straight day on Tuesday on the banknotes crisis, crying “where is the PM?” but Prime Minister Narendra Modi reached out to the people directly via his Twitter handle and sought their “first-hand view” on the decision to declare R500 and R1,000 notes invalid as legal tender.
“I want your first-hand view on the decision taken regarding currency notes. Take part in the survey on the NM App,” Modi tweeted, sharing the link to a website posting 10 probing questions.
Addressing BJP parliamentary party, Modi said the scrapping of the notes was not an end, but the beginning of a “long, deep and constant” battle against black money and corruption, which would benefit the poor and the common man.
Meanwhile, to keep the credit lines to rural India intact, the Reserve Bank of India (RBI) on Tuesday sent an advisory to commercial banks, regional rural banks (RRBs) and also urban and state cooperative banks to ensure adequate cash supply to farmers in the peak of rabi sowing season.
The RBI estimates that about R35,000 crore is required by the district central cooperative banks (DCCBs) to disburse crop loans to farmers at the rate of R10,000 crore per week. It asked Nabard to use its own cash credit limits of R23,000 crore to support DCCBs. Further, the RBI told commercial banks with currency chests to ensure adequate cash supply to DCCBs and RRBs.
“Adequate cash supply should also be ensured for rural branches of all commercial (including RRBs). Further, bank branches located in APMCs may also be given adequate cash to facilitate smooth procurement,” the RBI said. The finance ministry had late on Monday directed banks to give cooperative banks complete access to their deposits with them.
Speaking at the BJP MPs’ meeting, finance minister Arun Jaitley said the crackdown on black money would engender a “taxpaying system” and enable the government to spend an additional amount equal to its annual borrowing now for “development of rural areas and uplift of the poor”.
Stating that the move would create a “new normal” of white transactions, Jaitley said it would lead to “a jump in private investment and more public spending on welfare measures”.
“About R8 lakh crore will be collected from income tax this year and R8.5 lakh crore from indirect tax but despite that another R4-5 lakh crore (net borrowing is pegged at R4.25 lakh crore) is required to bear expenses for running the country,” he said, hinting that if these borrowings to bridge the deficit could be avoided, then more public funding of rural economy and welfare schemes would be possible, while the private sector invests in other sectors.
Analysts released reams of reports, prognosticating how the cash crunch will impact different sections of economy over the short to medium term with the median view that immediate adverse impact would be fairly significant while the opinions differed on the extent of long-term benefits. The replenishing of currency in circulation could take longer than many believed.
Kotak Institutional Equities wrote: “Expect the current currency shortage to improve over the next 2-4 weeks once sufficient new notes are available.
India has to replace around 24 billion pieces of currency, a gargantuan task, given the current printing capacity of 100 million pieces per day.” It added: “We note that the informal economy has been badly affected by the lack of sufficient currency in the past two weeks.
However, we see limited impact on general consumption (purchase of food and groceries) as companies have extended credit to the distribution chain and retailers to customers based on relationship and trust.
Most households in India have long-standing relationship with their neighbourhood grocery stores or service providers and the middle-income and high-income households have access to credit and debit cards.”
Meanwhile, Parliament on Tuesday saw yet another washout with an aggressive opposition raking up a fresh demand for R10 lakh compensation to the kin of each of those who died due to problems after demonetisation besides pressing for the presence of Modi during the debate on the issue.
Neither the Rajya Sabha nor the Lok Sabha could transact any business due to continuous uproar and pandemonium, leading to their premature adjournment.