As many as 73 per cent businesses said they were unable to meet the daily cash requirements to pay wages to contractual workforce because of the severe cash crunch prevailing after demonetisation, according to a survey conducted by PHD Chamber.
“In the business segment, 73 per cent respondents are facing huge cash crunch due to demonetisation as they are unable to fulfill their daily cash requirements to pay wages to daily wagers and contractual workforce,” said the survey based on responses from more than 50 economists and analysts, 700 business firms and 2,000 people during the month of December.
In response, PHD Chamber President Gopal Jiwarajka urged that cash-driven sectors such as construction and small and medium enterprises (SMEs) should be facilitated by increased cash limits for the payment of salaries of their daily wage and contractual workers.
While assessing the impact on people, 92 per cent respondents in the survey 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.
As many as 58 per cent respondents said they were facing high level of difficulty in fulfilling their day to day activities while 89 per cent respondents reported unavailability of cash at banks and ATMs as a major hurdle in withdrawing cash from the bank or ATMs, the survey said.
Jiwarajka 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.
“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 demonetisation to remonetisation,” he said.
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. There is a need of setting up of digital literacy booths outside banks majorly in rural regions for spreading digital literacy across all sections, Jiwarajka added. Government should incentivize 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, he said.
The government had demonetised Rs 500 and Rs 1,000 notes on November 8 and has allowed limited withdrawal of cash since then.