That the liquidity in rural and semi-urban India is likely to stay controlled in the days and months to come, which would keep the consumption choked and economic activities tardy, is now an inevitable conclusion.
Lingering demonetisation pains
Apropos of the report “FM on Facebook: Money has lost anonymity after demonetisation” (FE, January 9), finance minister Arun Jaitley stating that the period of pain and inconvenience over demonetisation is getting over and economic activity is being restored and that large amounts of cash in banks will lead to lower interest rate is an exercise in self- deception. One thing is amply clear: the remonetisation of the economy has been hopelessly slow-paced. That the liquidity in rural and semi-urban India is likely to stay controlled in the days and months to come, which would keep the consumption choked and economic activities tardy, is now an inevitable conclusion. The corporate world would stay happy for two reasons: the focus of public sector banks would shift from debt recovery to dissemination of funds and the clear indications for a lower corporate tax. However, there would still be myriad unanswered questions on the vacuum suction of the currency notes and its impact on the unsuspecting poor Indian, caught in the tortuous web in the immediate and long-term. While the discourse centres around digitisation of expenditure and fund transfers, low interest rates and lowering of direct taxes, pressing bread-and-butter issues have been pushed to the seats at the far back. There is absolutely no discussion of prices of essential commodities of daily consumption, as inflation climbs up relentlessly, the promised job creation, the promised sprucing up of rural credit and increased availability of cash in the farm sector, regular market for agricultural produce and its sustenance, and kick-starting the listless construction activity. There is sinister silence on restoring the vibrancy of the co-operative sector, the unflinching facilitator of farm credit in rural and semi-urban India. The theory of low interest rates jacking the economic activity up and increase the demand in the housing sector is wishful thinking, without substantive evidence, as money supply at phenomenally low interest rates from rich countries was not found levering the economy. At the same time, fall in indigenous interest rates on fixed bank deposits pinched the millions, whose dependency on interest is well documented. One wonders in what way accounting of the whole currency notes in circulation could lighten up the economy. A demand for more transparency and an imaginative approach is fully justified at this juncture.
Haridasan Rajan, Kozhikode