Agriculture plays a vital role in India’s economy. Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood. Agriculture, along with fisheries and forestry, is one of the largest contributors to the Gross Domestic Product (GDP). In 2015–16, agriculture contributed 17.4 per cent to India’s Gross Domestic Product (GDP), as compared to 18.3 per cent in 2013–14. As against the Twelfth Five Year Plan’s (2012–17) target of 4 per cent growth for the agriculture and allied sectors, the growth registered was 4.2 per cent in 2013-14, -0.2 per cent in 2014– 15, and an estimated 1.1 per cent in 2015–16. The agriculture sector in India is expected to generate better momentum in the next few years due to increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Factors such as reduced transaction costs and time, improved port gate management and better fiscal incentives would contribute to the sector’s growth. But all these growth momentum has witnessed a temporary jolt as the Government announced the banning of the 500 and 1000 denomination currency notes as a legal tender.
The major aim of demonetisation of bigger denomination currency was as follows; first, it is an attempt to make India corruption free, second it is done to curb black money, third to control escalating price rise, fourth to stop funds flow to illegal activity, fifth to make people accountable for every rupee they possess and pay income tax return and finally, it is seen as an attempt to make a cashless society and create a Digital India.
Major benefit of demonetisation in agriculture is that the ban on high value currency will also curb the menace of money laundering. Now such activity can easily be tracked and income tax department can catch such people who are in the business of money laundering. Most of the fake currency put in circulation is of the high value notes and the banning of 500 and 1000 notes will eliminate the circulation of fake currency. This move has generated interest among those people who had opened Jan Dhan accounts under the Prime Minister’s Jan Dhan Yojana. They can now deposit their cash under this scheme and this money can be used for the developmental activity of the country. Most of the people who have been hiding their income are now forced to come forward to declare their income and pay tax on the same. Even though deposits up to Rs 2.5 lakh will not come under Income tax scrutiny, individuals are required to submit PAN for any deposit of above Rs 50,000 in cash. This will help the income tax department to track individuals with high denominations currency. Finally, all the monetary transaction has to be through the banking methods and individuals have to be accountable for each penny they possess.
Such good are the benefits of demonetisation, but since majority of our agriculture transaction have traditionally been heavily cash dependent, short terms aftershocks of this move were expected. Cash is the primary mode of transaction in agriculture sector which contributes 15% to India’s total output. Formal financing in many parts, especially Punjab, Uttar Pradesh, Odisha, Maharashtra, Gujarat and Kerala is significantly from cooperative banks, which are barred from exchange-deposit of demonetized currency. Notably, this is a time of kharif harvest and start of rabi sowing, partly explaining why this period is dubbed the ‘busy season’ from a standpoint of credit demand, the other being bunching of festivals and weddings. Agriculture is impacted through the input-output channels as well as price and output feedback effects. Sale, transport, marketing and distribution of ready produce to wholesale centres or mandis, is dominantly cash-dependent, disruptions, breaks in the supply chains feedback to farmers as sales fall, increased wastage of perishables, lower revenues that show up as trade dues instead of cash in hand and when credited into bank accounts with limited access affect the sector.
These were some of the after effects of demonetisation but majority of farming community is slowly learning the new means of trade. But, now farmers are accepting the new mode of transaction (Cashless or Bank to bank Transaction). It is the myth the farmers refuse to accept cheque payment as Small dairy farmers in Andhra Pradesh accept cheques, Sugarcane farmers accept cheques from sugar factories, Moong farmers are accepting cheques from government procurement agencies, Apple farmers accept cheques from large buyers, Potato contract farmers accept cheques from food companies, Maize farmers in Nabrangpur - Odisha's poorest district are accepting cheques, and coconut farmers in Karnataka took cheques from state agencies and such mode of transaction has been increasing day by day. Moreover, Farmers accept insurance and disaster relief cheques. Thus dealing in cheque is not a new mode of transaction for the farmers. In some states government has failed to deliver the payments by cheque not because there is no mechanism, but due to local middlemen resistance. Food Corporation of India tried but failed to pay Punjab and Haryana farmers by cheque for wheat, only because the powerful commission agents want to first deduct the loan repayment amounts. So to portray that the farming community is not at all aware of modern means of cashless transaction is not so appropriate.
Few issues of cash payment is involved in payment of labourers, transporters and other small channels, cashless mode can be adopted after due persuasion and training. In the current scenario, It is true that the small and marginal farmers who sell off their produce in the village itself are hurt by the demonetisation. Similarly, value chains with minimal processing and direct consumer sales such as fruits and vegetables are hit. Most fresh produce is sold by small hawkers and vegetable mongers in the streets of India. Since they take payment in cash and buy their wares from the mandi in cash, business is down. These are symptoms of the crying need for reform and high time that the new systems are in place replacing the old traditional ones so as to ensure the every person is made accountable for each and every penny one earns.
The demonetisation has been accepted as a financial cleanup process by the people at large; the governments should make use of demonetisation as an opportunity to secure the economic wellbeing of the poor farmers in the country. The demonetisation could be an occasion to popularize Kisan Credit Cards, while making it available for not only to men farmers but also to all women farmers. The credit card should be in a position to help farmers purchase the needed inputs without much difficulty.
Demonetisation could then lead to a new era in agriculture provided it is managed and implemented judiciously.