In a first, the Central Government has openly admitted the negative effects of the demonetization. The Ministry of Agriculture in its report submitted to a meeting of the standing committee of Finance Ministry, has said that demonetization had severe negative effects on the farmers.
The Ministry of Agriculture acknowledged that due to the lack of cash, millions of farmers were unable to purchase seeds and fertilisers ahead of the rabi season.
The agriculture ministry informed the committee that when demonetisation was implemented, the farmers were either selling their kharif yield or sowing rabi crops. Demonetisation rendered all the cash they had in hand useless.
The report further states that even Government seeds couldn’t be sold. It says that not only small farmers but the bigger ones were also affected, as they found it difficult to pay the labours working on their field due to shortage of cash.
The government had later allowed the use of old notes of Rs 1,000 and Rs 500 for the purchase of wheat seeds. But this relaxation did not improve the situation much.
However, the Labour Ministry in its report praised the demonetization, saying that the move saw an increase in employment data in the subsequent quarters. In the standing committee meeting, the Opposition MPs criticized the demonetization and demanded the government to produce data on the loss of employment in the micro, small and medium enterprises.
The committee has 31 members including Congress stalwarts Veerappa Moily and Manmohan Singh.