Kashmir’s image unscathed post two years of demonetisation, but economy badly hit

Two years ago, when Narendra Modi-led government at the Centre demonetised 86 percent of currency in one go, acrimonious debates riled the country, except Kashmir. The move was immediately dismissed as a failure. Kashmir remained largely unaffected.
When several people died in queues outside banks, where they had been asked to deposit Rs 1000 and 500 notes, there was no such rush in Kashmir. The mooted reaction in Kashmir also deflated the propaganda that the Valley was the hub of hawala and black money.
Economist Prof Nisar Ali said empirical data has proved that demonetisation has been a failure, especially in Kashmir.
“Reserve Bank of India in its recent annual report had said 99.3 percent cash has been returned post demonetisation which means there was very less black money in the economy in India. Moreover, in comparison to rest of the country, the demonetisation has been taken well by the people in Kashmir,” he adds.
Prof Ali said long-term achievements of demonetisation in Kashmir and the rest of country have been “abysmal”. He said instead of making economy “cash less and less cash economy” as envisaged by the Centre, demonetisation has hit local businesses badly.
“Union finance minister’s claim that demonetisation has spurred direct tax collections and tax net had widened is not true. No doubt, incomes have gone up due to pay revisions but tax base widening can’t be attributed to demonetisation,” he said.
Demonetisation, along with the introduction of GST, has hit the informal sector in Kashmir badly, Prof Ali said.
Demonetisation led to closure of hundreds of manufacturing units, causing job losses, which has affected the economy and GDP, he said.
“Most of the people in smaller cities continue to make purchases through cash which also makes claims of Centre of having a cashless economy fall flat. This is the case even in Kashmir as ours is a cash economy by and large,” Prof Ali said, adding the objectives of the decision have not been achieved. He said “invalidating 86 percent of currency in one go was a shocker”.
In Kashmir, he said, financial position was transparent even before demonetisation because the majority of the people had bank accounts.
A Jammu and Kashmir Bank executive, wishing anonymity, said Kashmir reacted calmly to the demonetisation because the prevailing situation forces people to keep their money in banks.
“People don’t keep illegitimate money in banks,” said the official. He said the number of people who had cash at homes at the time of demonetisation was negligible. “Demonetisation proved that there was no such black money as was being projected and Kashmir’s image got cleared. Except one or two incidents there was no major seizure of high value notes. The crisis was managed by banks well in the aftermath of demonetisation who informed public about every fallout and created awareness about withdrawal and deposits,” the official said.
While Kashmir came clean, as did most of the states, its economy did take a hit. Kashmir Economic Alliance president Muhammad Yaseen Khan said, “The government has crushed cash economy of Kashmir as small households and businesses were hit badly post demonetisation. Government has failed in its endeavor of digitisation as GST lacks clarity and frequent internet shutdowns are a hurdle for digital economy to work.”
“If the economy is in doldrums it is because of demonetization. Cash economy is important especially amid fragile situation but it has been finished here,” Khan says. The economic survey of 2015-16 states that J&K has an estimated 42 lakh working population of which 58 percent workforce is engaged in agrarian activities, while the remaining 42 percent is in private and public sector.
“While the agriculture activities come under tax rebate category, of the remaining working population almost 90 percent have bank accounts. So their incomes are already known and accounted for in the bank details,” said ShakeelQalander, industrialist and member of a civil society group KCSDS.
He said J&K is an economically backward state and depends on bank lending for carrying business activities and trade activities. Also, he said, people in Kashmir prefer to deposit their cash in banks because of safety concerns arising out of the situation.
“The demonetisation has in a way cleared all misconceptions and myths being propagated by certain political parties and vested interests about Kashmir, erroneously labelling it as hub of black money and fake currency,”