THIRUVANANTHAPURAM: Nothing seems to be going right for finance minister Dr Thomas Isaac. Just when he managed to revive tax collection in the state, demonetisation has dealt a sudden massive blow. Growth in tax collection had failed to touch double figures during July, August and September. But then, after collection drives were stepped up, October recorded a tax revenue growth of 17 percent. Now, with demonetisation, Isaac’s hope of improving on his healthy performance has been shattered.
“The Department estimates that for November and December tax growth will drop below 10 percent,” a top Finance Department official said. Signs of economic downturn is evident everywhere. KSFE transactions have dropped by 98 percent in the last two days. Funds to be transferred to local bodies have been virtually frozen. “We have electronically shifted money to the accounts of local bodies but they don’t have the currency to disburse it to beneficiaries and for sundry projects,” a Finance Department official said.
Insurance companies have recorded an average 80 percent fall in business. Adalats organised by various departments have been cancelled. Pensioners who have parked their money in the Treasury and primary cooperative banks are refused payment. Daily wagers are not paid. Perishable goods markets are deserted, leaving poor hawkers high and dry. Planning Board member Dr K.N. Harilal likened the situation to a medical emergency.
“Money circulation in the economy is like blood flowing through the body,” Dr Harilal said. “Now, the money is being drawn out of the system like blood being drained out. If an equal amount of money is not infused on an emergency basis the entire economy will collapse,” he said. According to tax expert Dr Jose Sebastian, demonetisation will affect the land and construction sectors the most. “Land and construction are the most fertile sector for planting unaccounted money,” he said. Sales tax collection will be hit as the liquidity crunch will be faced most by the trading community. “We are a consumption economy. Any fall in transactions, even for a short period, can virtually decimate the semi-urban and rural economy,” Dr Harilal said.