Thomas Isaac sees unhappy new year

Thiruvananthapuram: With the RBI promising currency to treasuries and banks, salary and pension payments for November will go without any major hitch. However, Finance minister Dr T M Thomas Isaac said that the revenue shortfall the state was witnessing as a result of demonetisation would manifest itself as a payment crisis next month. “This month, after the announcement of demonetisation, revenues have fallen precipitously and we will not have enough revenues to meet out salary requirements,” Dr Isaac told reporters here on Wednesday.

The finance minister said that demonetisation would not achieve the black money targets set by Prime Minister Narendra Modi. “That Rs three lakh crore would be revealed as black money, by virtue of the amount not coming to the banks, is wishful thinking,” Isaac. At the most, he said some Rs one lakh crore would not reach the banks. “But even by moderate estimates, demonetisation would bring down GDP growth by two percent, which will translate into a loss of Rs two lakh crore,” he said and added: “If you have only Rs one lakh crore to show for a loss of Rs two lakh crore, demonetisation is like razing down an entire palace to do away with a pack of rats.”

Dr Isaac said the claim that demonetisation would recapitalise banks had also been belied. “Just the last day RBI increased the cash reserve ratio of banks. This means the money that has flown into the banks has to be kept as no-return cash reserve and not in government bonds that would fetch high returns,” Isaac said.