Nearly a week after the de-monetisation announcement, industry body Confederation of Indian Industry (CII) on Tuesday called for gradual “liberalisation” of the current cash withdrawal limit set for corporates, stating that the existing ones are “tiny” for functioning purposes.
“We need to address as we go along the value limit set for companies. The existing limits, say, ₹50,000 a week are tiny for corporates,” Naushad Forbes, President, CII, said in an interview.
The Centre must also look at unconventional ways (maybe asking the Army to help with transfer of cash) to reach more cash to more points in the country faster, Forbes said.
Asserting that demonetisation of ₹500 and ₹1,000 notes was a right move for the benefit of the economy in the long run, Forbes at the same time said that one would have to liked to see a “smoother transition”.
“We would all have liked to see smoother transition. We would all have liked to see cash reaching more ATMs. Could it have been done given the scale and the size of the challenge? I don’t know. It’s easy for us to be wise after the fact,” he added.
Broadly, it (demonetisation) is recognised as to be the right thing done in the interest of the country. Everyone (CII members) is coping with the short-term inconvenience, he said.
“Yes, people are getting impatient and rightly so. The actual implementation on the ground is starting to improve. In some parts of the country, the issue is going away and will spread as more cash gets into the system. As the new ₹ 500 notes get into the system, it will make a big change in terms of putting liquidity back,” Forbes said. In one night (November 8), India declared ₹500 and ₹1,000 notes (85 per cent of then existing cash circulation) as illegal, sending markets, common man and economy into a tizzy.
“We need to address the flow going forward. This (demonetisation) is direct way of addressing the stock, which in itself will address the flow of cash. We need to address the flow aspect too in sectors (such as real estate) of the economy where illegitimate flow of cash is common,” Forbes said.
Forbes expressed confidence that retail industry — which has been badly affected by the de-monetisation move — would make a comeback once the new ₹500 notes are introduced.
“Retail trade in this last one week has been severely impacted. Many FMCG firms have seen a drop in demand of as much as 50 per cent. It’s a short run impact. As cash gets back into the system and ₹500 notes come into circulation, we should see most of the 50 per cent come back,” he added.
Real estateHe also made a case for more reform in the real estate sector, where cash transactions are common. There is need to rationalise stamp duties, which is single biggest driver of cash transactions.
“Over the last few years, we have seen the rise of several real estate companies that have prided themselves in being transparent and doing cheque-based transactions. It started in Chennai. A change like this (demonetisation) will only go to strengthen the hands of those companies that have built a reputation for transparency in what has otherwise been murky industry,” he said, adding that “there should be some basis for levy of stamp duties and I don’t understand why stamp duty should be higher in one State than other.”
Forbes also stressed the need to bring real estate sector within the fold of the proposed Goods and Services Tax framework.