Demonetisation had ‘severe’ impact on Kerala economy

The demonetisation had a ‘severe’ impact on Kerala as 56 percent of its economic activity was hit, besides causing a dip in tourism revenues and remittances, important drivers of growth of the state’s economy, according to Economic Review for the 2016-17.

“Thus 56 percent of the economic activity of Kerala was immediately affected by the withdrawal of the specified bank notes. It also affected earnings from tourism and in the flow of remittances”, the economic review placed in the Assembly said.

As per quick estimates relating to the corresponding month of the previous year, domestic tourists fell by 17.7 percent in November 2016 and foreign tourist arrivals by 8.7 percent, the report said.

The corresponding figures for October 2016 were a positive 5.2 percent and 6 percent respectively, the report pointed out.

Pointing that the impact of demonetisation in terms of cash deficit and its consequences was particularly severe in the state also because of the distinct character of its banking sector.

Around 60 percent of all deposits are in the co-operatives in the state and decision of RBI to keep co-operative sector from note exchange process led to closure of banking activities at the level of Primary Cooperative agriculture societies and targeted their credibility.

Demonetisation also affected remittances due to the difficulties in withdrawal from banks, the survey said.

(Agencies)

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