If there is one place in the country where demonetisation had little to no effect, it is in Kashmir. Rs 500 and Rs 1,000 notes ceased to be legal tender in the wake of the announcement by Prime Minister Narendra Modi — as part of an effort 'to weed out black money from the economy'. And while the rest of country is grappling with the cash crunch with serpentine queues outside ATMs, such mayhem has not been witnessed in Kashmir.
Experts say that although the ongoing unrest is partially responsible for this phenomenon, there are other factors that have contributed to demonetisation having a limited effect in the state. When the armed insurgency erupted in the Valley in the early 1990s, there were widespread allegations of money being looted by forces as well as militants from the homes of people, said noted businessman and economist, Shakeel Qalender.
“Rather then keeping money in their homes during the turmoil, it became a habit for people to deposit it in banks,” Qalender said.
Although in the three initial days of demonetisation, a mild rush was witnessed in banks across the Valley and in Jammu, the Jammu and Kashmir Bank was quick to issue a notification, asking officials to deal in available cash for the time being, something to which they happily agreed.
“All employees are being credited salaries online and new schemes like NREGA and others also credit money into people's accounts. Contractors get their money deposited into their accounts through online mechanisms. Most people in Jammu and Kashmir have banks accounts,” Qalender said.
Jammu and Kashmir has a working force of an estimated 42.5 lakh (out of the total population of 1.34 crore); a third of this is associated with agrarian activities while the rest is in the public and private sector. The state has around 2,000 bank branches which means one bank branch for every 6,500 people. In the first few days after the demonetisation announcement, one branch was dealing with at least 2,000 customers, besides having post offices and other financial institutions. Nearly 1,200 branches are operated by the Jammu and Kashmir Bank and the rest by other public and private sector banks. A majority of the state's banking business — at least 65 percent — is conducted by the Jammu and Kashmir Bank while another 10 to 20 percent is with other public sector banks.
Outside the state, many people, including Union Defence Minister Manohar Parrikar, had said that because of demonetisation, stone-throwing incidents in Kashmir had reduced. Government figures and the measures taken to control the protests suggest otherwise. “But,” said Irshad Ahmad, a PhD student of economics at Kashmir University, “The number of stone-pelting incidents came down drastically in September, not due to demonetisation, but following a general pattern of weariness and the crackdown on protesters.”
In fact, the data released by the government shows that there was a general declining trend in the incidents of stone-pelting in Kashmir following the killing of Hizbul Mujahideen commander Burhan Wani. In July, when Burhan was killed, the Valley witnessed 820 incidents of stone-pelting incidents which came down to 747 in August.
In September, the incidents further reduced to 535. From September to October, the number of stone pelting incidents decreased from 535 to 157, witnessing a 41.53 percent fall. Today, there has been an overall decrease of 87 percent in such incidents since July.
Former member of the board of directors, Jammu and Kashmir Bank, and noted economist, Professor Nisar Ali said the state's economic activity in terms of routine transactions had been put on hold for several months due to the ongoing unrest. He said consumers had deferred their expenditure because shops were not open and choices were not available.
“Black money has already been converted into assets here. First, it is the land that is why land prices in Kashmir are higher than in Mumbai. Most of the black money got into the hands of the land mafia. The second is the real estate and the third is gold. So the liquidity with a black money-holder wasn't enough to generate panic,” Ali said.
The ongoing conflict in the Valley is the reason that people with black money were able to evade the law for decades. Although in recent years, tax collection has significantly increased in the state, during earlier years, a majority avoided paying taxes.
During the 2015-16 Financial Year, the Commercial Taxes Department's collections alone stood at Rs 5,515.96 crore. Ali, however, is not impressed. “How may times have I-T people carried out raids here? Not a single instance in the past two decades. The function of such organisations is literally zero here”.
“Now the money, which you keep at your home as a safety cushion, has been spent because of the five months of unrest. The money ended and it circulated from retailers to wholesalers and distributors. It went into the banks much before demonetisation forcibly brought it there," Ali said.
Published Date: Dec 08, 2016 08:54 AM | Updated Date: Dec 08, 2016 13:24 PM