Demonetisation will hit economy: Thomas Isaac

Finance Minister Dr. Thomas IsaacThiruvananthapuram: Kerala Finance Minister T. M. Thomas Isaac said in the Assembly on Wednesday that demonetisation of currency would lead to accentuation of economic recession.

The drop in availability of money up to December 30 would lead to reduction in trade, the Finance Minister said in a statement in the Assembly.  The House protested against remark of BJP general secretary that Kerala was a centre of hawala transactions and that was why the Kerala Finance Minister was opposing action taken by the Centre.

The Minister told the House that the government was in favour of strong measures against black money and fake currency. However, the demonetisation could have been done in a disciplined manner without causing difficulties to the public. The drama, and the confusion it caused, was unnecessary.  If one or two weeks were given for changing notes before demonetisation, it would have still served the purpose.

Dr. Isaac said that there was no clarity on how the money with cooperatives, which do not come under the banking regulations, was to be handled. This would cause anarchy in the cooperative sector. There were also no clear directives regarding treasury transactions.

He said that the treasury director had been asked to prepare statement of currency notes of Rs. 500 and Rs. 1000 denomination in possession of treasuries. Banks coming under banking regulations were required to prepare such statements.

Officials had been directed to remit amounts collected on or before November 8 to the  treasuries before November 10. The draws of Kerala lotteries scheduled for Friday and Saturday had been postponed.  The auction of chit funds of KSFE has also been postponed. Currency notes of denomination of Rs. 500 and Rs. 1000 were not being accepted in government offices.

The Minister said that while demonetisation would help to eliminate counterfeit currency, its impact against black money was limited. Much of the black money was parked abroad and in gold and real estate in India. Though the demonetised notes could be exchanged from tomorrow, restrictions on exchange and withdrawals from bank accounts would continue till end of December.

Opposition Leader Ramesh Chennithala said that Dr. Isaac should take up the issues with Union Finance Minister Arun Jaitley and Dr.Isaac agreed to do so. The Chief Minister Pinarai Vijayan had already written to the Prime Minister about the problems, he said.