Demonetisation has hit Kerala's economy: Panel

Thiruvananthapuram: Demonetisation has affected various segments of Kerala's economy, including tourism, remittances and the cooperative sector, according to an expert committee appointed by the CPI(M)-led LDF government to look into the impact of notes ban on the state.

Releasing the committee's interim report, State Planning Board Vice-Chairman V K Ramachandran said, "We are still assessing the impact on the real resources mobilisation of the state, which is crucial for the 13th Five Year Plan that will begin in April 2017."

"I am not going to make any prediction on resource mobilisation. Hope things will not be as bad as now," he added.

He said due to the distinct character of its banking sector in which cooperatives and primary cooperative societies play a central role, the cash crunch has affected Kerala as cash transactions are predominant in its economy.

The report said lack of access to cash has dealt a blow to tourism.

There was a dip of nearly 17.7 per cent in arrival of domestic tourists and 8.7 per cent in foreigners post demonetisation compared to the same time last year, Ramachandran said.

Similarly, remittances play an important part in Kerala's economy and the constraints caused by the policy can cause disruption in flow of remittances, it said.

"These features inter alia contribute to the intensity of the impact of the demonetisation on the state's economy and its people," said the report of the committee, headed by Professor C P Chandrasekhar, (Centre for Economic Studies and Planning, Jawaharlal Nehru University).

The report said RBI's decision to keep away cooperative banks and societies out of the note exchange process has badly affected the state as 70 per cent of deposits in primary agricultural cooperative societies in the country come from Kerala.

Besides being excluded from exchange of demonetised notes, access of PACs to currency was cut off, forcing these institutions to shut down their operations, the report said.

Compared with an average outstanding deposit base of Rs 19.9 crore per branch and Rs 28,000 per individual member, each PAC was treated as an individual and its withdrawal limit set at Rs 28,000 a week.

What was consciously ignored was that it was not each PAC that was being denied access to cash, but lakhs of members who held deposits in these institutions. "There cannot be a single other instance of expropriation of the purchasing power of a population of this magnitude," the report added.

On a cashless society, Chandrasekhar said it is a distant dream and is not going to happen in the near future due to lack of various infrastructure in the country.