Production process not only in the informal sector but also in the formal sector has been impacted directly or indirectly, said the survey, reveals a PHDCCI survey released today.
“Cash driven segments such as fruits and vegetable markets, horticulture and floriculture, agricultural and food processing, construction activities, among others have been impacted,” it said.
Survey of economists, businesses and people on a structured questionnaire was undertaken by the PHD Research Bureau of PHD Chamber of Commerce and Industry during the month of December 2016. The survey got responses from more than 50 economists and analysts, 700 business firms and 2000 people.
In the business segment, 73 percent respondents are facing huge cash crunch due to demonetization as they are unable to fulfill their daily cash requirements to pay wages to daily wagers and contractual workforce.
However, the survey said that the immediate effect would probably be short-lived and the long term effect will drive the Indian economy to new areas of growth in the coming times, said the survey study
Though the contraction in GDP cannot be ruled out due to fall in economic activity, growth in demand will start gaining momentum once the economy moves out of the transition stage of demonetization to remonetisation, said Gopal Jiwarajka, President PHD Chamber.
It is expected that removal of black money from the system would create a good scope for reduction in interest rates via-a-vis lower inflationary expectations and reduce the incidence of direct taxation, he said.
While assessing the impact on people, 92 percent respondents said that the major impact of currency crunch is seen on daily needs of the people such as purchase of eatables, dairy products and other necessities, according to the survey
Over 58 percent respondents are facing high level of difficulty in fulfilling their day to day activities. 89percentRespondents reported unavailability of cash at banks and ATMs as a major hurdle in withdrawing/depositing cash from the bank/ATMs, said the survey study.
There is a need of setting up of digital literacy booths outside banks majorly in rural regions for spreading digital literacy across all sections of the nation, said Jiwarajka
Government should incentivise RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer) under the ambit of digital transfers so that more and more people adopt the available facility and are less dependent on cash transactions.
The threshold limit of Rs. 2,00, 000 for transactions under the RTGS and Rs. 50,000 for transfers under NEFT should be exempted from the service tax.
Also, removal of service tax charged while making payments through credit/ debit card or any other payment card up to Rs. 2,000 in a single transaction is a good start for the transformation of cash transactions to the digital transfers, however, the limit could be revised to Rs. 10,000.
Government needs to ensure that the sufficient quantity of money is being transported to the banks and ATMs in both rural and urban areas on time, he said, adding Government should print more and smaller denominations currency such as Rs. 50, 100 and Rs. 500 notes so that there should be sufficient circulation of money in the market.