Indian Industry Suggests Ways To Tide Over The Cash Crunch Inconvenience 

India Inc is largely positive on the government's move to withdraw old Rs 500 and Rs 1,000 currency notes from circulation, according to the feedback industry body Federation of Indian Chambers of Commerce & Industry has received from its members.

“Industry feels that this is a healthy move towards ‘cashless economy' that will not only help curb the ‘black money' accumulated over several years but also ultimately help in lowering of tax rates and widening of tax brackets,” FICCI said in a media statement.

However, there will be some impact in the near term, with transition still underway and to tide over this challenge, industry members have provided specific suggestions which were shared with the Prime Minister's Office, secretary in the Department of Economic Affairs and Secretary of the Department of Industrial Policy and Promotion.

Healthcare

Issue

Private hospitals cannot accept old high-denomination notes which is an inconvenience for patients.

Suggestion

• Private hospitals, like government hospitals, should be allowed to accept old notes to administer high-end healthcare facilities that are not always available with government hospitals, along with other services.
• Mobile banking vans should be deployed at private hospitals by banks.

Tourism

Issue

Foreign tourists are inconvenienced due to inadequate availability of local currency; the Rs 5,000 foreign exchange limit is insufficient.

Suggestion

• Measures need to be taken to ensure foreign exchange dealers have enough liquidity to meet the demand from foreign visitors.
• Review the Rs 5,000 limit set for exchange of foreign currency.
• Entry into monuments for foreign nationals should be made free in the meanwhile, until monetary circulation normalises.

Fast Moving Consumer Goods

Issue

Currency shortage is affecting the supply chain, including wholesalers, retailers and companies, impacting production.

Suggestion

The Reserve Bank of India should raise the Rs 50,000 limit on current account overdraft facilities to allow the supply chain to operate on a credit system until normalcy is achieved.

Read: Consumer Companies Turn Tight-Fisted On Advertisement Spends

Non Banking Financial Companies

Issue

The farming community is unable to pay EMIs on farm equipment loans – often financed by NBFCs – in case borrowers have no access to cheques. Farmers are also unable to procure seeds for the next season as a result of the liquidity crunch.

Suggestion

The government should consider utilising the NBFC network to bring old notes back into the banking sector. NBFCs in rural markets can be allowed to accept demonetised currency for repayment of EMIs on farm equipment loans.

Microfinance Institutions

Issue

Imposition of a Rs 50,000 per week cap on micro finance institutions has affected disbursement of fresh loans.

Suggestion

Lift the limit on withdrawal for MFIs and utilise their network to absorb old demonetised notes and issue fresh currency in the sector.

Read: Demonetisation Adds To Rising Risk Across The Microfinance Sector

Agriculture, Livestock Export

Issue

The livestock meat export industry has been affected since the raw material in the pipeline has already been consumed and livestock aggregators are unable to pay farmers due to the restrictions on cash withdrawal.

Suggestion

Cash withdrawal for crucial agro-based sectors should be raised to restore their supply chain, allowing them to resume economic activity.

Apart from these focused suggestions aimed at various sectors, industry members also made suggestions that could ease day-to-day operations of businesses.

• Banking hours on working days should be extended to meet the high demand for new currency notes.
• All surcharges and taxes on digital payments should be removed to promote the use of plastic money since high surcharges discourage online transactions.
• RBI's Monetary Policy Committee should reduce the repo rate by 50 basis points and measures should be taken to provide easy finance for sectors like housing, automobiles and consumer durables.
• Focus on expenditure for sectors such as infrastructure will support stabilisation of demand.
• To ensure the long-term benefit from demonetisation, the government should reduce direct taxes and widen the tax bracket in the upcoming Budget which will be announced on February 1, 2017.