The impact of cash crunch on farmers is likely to have a cascading effect on the broader economy in southern India
Bengaluru/ Chennai: P.V. Rajappan, a rice farmer in Kerala’s drought-hit Palakkad district, had been planning to drill a borewell to irrigate his next crop. He thought he would be able to do it this year. Rajappan delivered his entire harvest—10,210kg of paddy—to the state-run Civil Supplies Corporation, popularly known as Supplyco, and waited for the payment of Rs.2.25 lakh to come in.
Then came the 8 November announcement that Rs.500 and Rs.1,000 banknotes had ceased to be legal tender. Supplyco had no money to pay farmers, and Rajappan hasn’t received a rupee. His savings too are of no help. The cooperative bank where he kept his money, like almost every other farmer in the region, has become practically non-functional because of curbs imposed on cooperative banks by the Reserve Bank of India after demonetisation.
So, for now, Rajappan has had to shelve his plans of drilling a borewell to irrigate his next crop.
The cash crunch triggered by the scrapping of Rs500 and Rs1,000 notes has come at a time when the entire southern peninsula is reeling under drought-like conditions because of a deficit monsoon.
From 1 October till 11 November, Tamil Nadu was 68% rain- deficient. The rain deficit in Telangana was 34%, in Andhra Pradesh 78%, in Karnataka 77% and in Kerala 60%, according to weather forecaster Skymet.
The cumulative impact of drought and demonetisation will hurt the rural economy severely, said Himanshu, an associate professor at Jawaharlal Nehru University in New Delhi and a Mint columnist.
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