Note ban to have long-term effect on economy: Experts
Economists and experts across Madhya Pradesh have predicted a long-term advantage of demonetisation, with a rider that India has to wait at least till March 2017 to see the end to the liquidity crunch.
Dewas industry association president Ashok Khandelia said, “The demand slowdown will continue until the liquidity crunch gets over, and it will take at least a quarter for demand to pick up.”
Elaborating on the subject, RG Dwivedi, regional director of PHD Chamber of Commerce and Industry, said, “The consumption has come to a standstill, impacting the supply-demand chain hugely. It has had a negative impact on the economy as of now. Cash-driven industries will have more pain. Non-performing factors in MSME will increase while small industries will suffer. But if we delve deeper, we should understand that in the past 50 days, the banking and commerce sector has become more organised. This will deliver positive effects in the long run.”
“Agriculture amounts to nearly 40% of the GDP in Madhya Pradesh. If agriculture suffers, there are industries and services to rescue the economy but demonetisation has broken sectors of industry and agriculture badly,” said Jagdeep Singh, a professor of Economics in MP.
‘Construction industry is badly hit’
“There has been a fall of 20-25% in consumer goods sector. The labour sector in MP has registered a fall of up to 40%. There is absolutely no work in sectors like the real estate. The construction industry is badly hit. There is no money in the market for even paying transportation costs,” said CP Sharma, MP chairman of Confederation of Indian Industries (CII).
“Many units have stopped working night shifts and a number of contract labourers have lost their jobs,” Association of Industry (MP) president OP Dhoot told HT.
In Pithampur, the industry is facing difficulty in making payments through bank accounts. “Our contractor opened bank accounts of workers and transferred money to their accounts but they have been unable to withdraw the money as the accounts are yet to be activated. Local bank officials have said that new accounts are getting processed at the headquarters. The delay is causing workers unrest,” industrialist Yogesh Shah said.
The textile sector has been one of the worst hit. In many textile segments, especially in the powerloom sector and retail business, entrepreneurs prefer to purchase yarn and other inputs with cash and also sell fabric and finished textiles goods without proper documents.
‘Impact more severe on sectors heavily dependent on freight movement’
The impact has been more severe on sectors heavily dependent on freight movement such as soybean processing industry. Small industries in iron and steel sector and garments sector have also been affected.
Suggesting an immediate solution, Dwivedi said, “With an immediate effect, the government and the banking sector should slash home loan rates up to 7% and give rebate on principal and interest repayment. This will encourage people to invest and banks will receive more money, which will help stabilise the economy up to a large extent. Also, hard hit industries such as real estate will revive.”
CP Sharma suggested that streamlining the 2 lakh-plus ATMs across the country, more than half of which are inactive now, would sustain purchasing power.