 "Demonetisation: NE industry demands more govt spending in infra projects")
Like rest of the country, business activities in north-eastern states have taken a hit too following the demonetisation of Rs 500 and Rs 1,000 currency notes since November 8.
According to industry estimates, there has been a drop of around 25 per cent in business activities across sectors in the region. Construction industry, retail shops and establishments, which mostly deal in cash, are facing the heat in particular. Sales of high value items, luxury goods and gold have slowed down in the region since November 8.
According to regional estimates of the leading trade and industry body, Federation of Industry and Commerce of North Eastern Region (FINER), the lull in the economy of the region would continue for at least six months. However, it feels that increased government spending on infrastructure projects in the region and more lending by banks could bring the economy back on its track soon.
“We are hopeful that the current drive of the government against black money will eventually boost growth. This has brought a kind of course correction in the economy which will result in a short term dip in GDP but the benefits would be felt in long-term. However, with the economy of the north-east too distinct from other parts of the country, the dip in growth could be felt for a longer time. An increase in government funding, infrastructure projects and spot loans by banks could help us bounce back,” said Pabitra Buragohain, the president of FINER.
According to FINER’s assessment, the hit taken by the construction and real estate sector of the region could be to the tune of 50 per cent. Work on many projects funded through cash has suddenly come to a halt. Also the cash crunch in the economy has affected many other projects as labour and worker payments had to be put on hold for the time being.
With the presence of banks being poor in the region, the industry believes in innovative mechanisms that could help the regional economy come out of the cash crunch. With regard to retailers, it has been suggested that cash transactions be allowed.
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Shortage of hard cash was mainly affecting the retailers and roadside vendors across the region. Though there has been a spurt in cheque payments, the fear of bounced cheques is holding back many businesses from relying on it. The industry also asked the government to come out with stringent laws to prevent cheque bouncing cases.
“While this is a transition period and we expect things to settle down once the new currency circulates in the market, sectors that are dependent on cash payments have to suffer longer,” said Bajrang Lohia, vice president of FINER.
Welcoming the government’s move, the industry body, however, said the surprise element was needed to make the crackdown on black money successful.
“Yes there is a bit of inconvenience that we are facing, but we don’t see any other way in which the government could had done this. It was the only way to make the drive successful,” said Rajeev Agarwal, also a vice president of the industry body.
READ OUR FULL COVERAGE ON THE MODI GOVT'S DEMONETISATION MOVE