New Delhi: Three weeks after the Narendra Modi government banned high-value currency notes, there still remains a cash shortage in India’s financial system. Banks and ATMs witnessed a heavy rush on 1 December as people sought to withdraw their salary to meet the spending requirements at the beginning of the month. While the Modi government has eased and altered withdrawal and deposit norms since 9 November in its bid to ease cash flow, the series of government notifications have also contributed to the confusion.
Here are the key developments:
• The government has cut short the deadline of using old Rs 500 notes at petrol pumps and for buying airline tickets at airports till 2 December instead of 15 December announced earlier. Hence, with effect from 3 December, under the new rules, the banned Rs 500 notes cannot be used for purchase of petrol, diesel and gas at the stations operating under authorisation of public sector oil marketing companies and for buying airline tickets at airport counters, a government notification said.
• Amendments to the income tax laws do not seek to tax inherited gold and jewellery and also those items that are purchased through disclosed or agriculture income, the government said on Thursday. During search operations, conducted by income tax department, there would be no seizure of gold jewellery and ornaments to the extent of 500 grams per married women, 250 gm per unmarried women as also 100 gm per male member of the family.
• The Lok Sabha has passed the Taxation Laws (Second Amendment) Bill, 2016, to ensure that people with unaccounted wealth can be penalised with higher tax penalty and come out clean.
The deadlock between the government and opposition benches continues with both Houses being adjourned for the day. The reactions coming from the Opposition parties against the Modi government remain sharp and the acrimony could affect deliberations over the roll-out of the goods and services tax (GST) from 1 April 2017:
• West Bengal finance minister Amit Mitra: “We must do GST but do it at a time when it is feasible, successful, when states’ revenues do not decline significantly, Centre is able to compensate the states and federal polity of India is preserved. I do not see that at this time.” Mitra is also chairman of the empowered committee of state finance ministers.
• Finance minister Arun Jatiley has meanwhile said that “GST, demonetisation are going to be game changers in Indian economy,” reports PTI.
The impact of the demonetisation drive on the wider sectors of the economy remains mixed. A more clear picture will emerge at the end of December although reports of the sectors dependent on unorganized labour have started to feel the cash crunch to disburse salaries:
• Powerloom owners are not able to provide full wages to their weavers and others in the industry due to demonetisation.
• Government task force’s proposal to install 1 million card swipe machines may require an investment of nearly Rs1,000 crore, says NPCI chief.
• The PMI for November came in at 52.3, down from 54.4 in October; though the demonetisation impact has not been very severe.