Direct benefit transfer-based relief measures for farmers and the SME sector in the wake of the hardships caused by demonetisation could be the big announcement to look out for in Prime Minister Narendra Modi’s New Year’s Eve speech.

According to a report, the government is keen to boost purchasing power and consumption, especially in the wake of the economic disruption and currency shortages caused by the sudden demonetisation drive, and also announce further measures to continue the prime minister’s “crusade” against black money and corruption. Citing government officials, the financial daily reported that direct benefit transfer could be used to shore up sectors hit by demonetisation. Among the proposals that the government has been deliberating upon is an income transfer scheme, the report added.

As reported earlier, according to government sources, the prime minister’s address is likely on the evening of December 31. However, the sources said that the possibility of advancing it to the evening of December 30 remained open.

Why farmers and SMEs?

The demonetisation drive has exposed the dependency of poor farmers and small businesses on informal credit systems in a country where half the population has no access to formal banking. Small-time financiers, despite their high interest rates, have long been a vital source of credit for the rural economy, and the ban on Rs 500 and Rs 1,000 notes has made it increasingly impossible for them to lend as well as to get paid.

Various relief measures, such as allowing farmers to use the old Rs 500 notes to buy seeds from central and state-owned companies, have already been announced for farmers. On December 20, the government announced that farmers, whose crop loan due dates fall between November 1 and December 31, would get 60 days more for availing the prompt repayment incentive of 3 per cent. Further, to help farmers meet their cash needs for the current Rabi season, the government has directed the National Bank for Agriculture and Rural Development to disburse Rs 21,000 crore to District Central Cooperative Banks for onward lending to farmers through Primary Agricultural Cooperative Societies. Over 40 per cent small farmers get crop loans from cooperative institutions.

Reports have also emerged of small businesses across the country being hit hard by the sudden decision and its subsequent impact. Especially in the politically vital state of Uttar Pradesh. The state’s handloom and leather industries have been facing shortages of capital and raw material, and difficulty in payment of wages post demonetisation. The issue was serious enough that Chief Minister Akhilesh Yadav wrote to Prime Minister Narendra Modi to increase the withdrawal limit for leather traders in order to ensure payment of wages to shoe makers in Agra. The sari textile industry in Mathura has also been severely hit by demonetisation. According to agency reports, factory owners have said that they seem to be left with no option but to close their factories as there is no cash flow in the market.

Crackdown on benami property?

While the government’s narrative on the need for demonetisation might have shifted, from a primary focus on fighting black money, terror financing and fake notes to promoting a less-cash economy, the prime minister has continued to hint at further measures to continue his original “crusade” against unaccounted income.

Addressing members of the Indian community in the Japanese city of Kobe on November 13, Modi had said that after the demonetisation scheme “there is no guarantee that more (measures) won’t follow”. 

Days after his trip to Japan, in his subsequent speeches in Goa and Karnataka, the prime minister gave further hints about measures which would follow demonetisation. Back then, he had announced that the next step in his war on “black money” and corruption would be a crackdown on benami properties. Later in November, while speaking at the BJP Parliamentary Party meeting, the prime minister said, “This is not the end but only a beginning of our struggle.” Modi described demonetisation as the beginning of a “long, deep and constant” battle against black money and corruption.

Source: Business Standard