In an interview to PTI, Assocham president Sunil Kanoria lamented the lack of preparedness and the manner in which demonetisation was implemented, saying perhaps the “gravity and the size of the challenge was not really understood”.
“There is a lot to be worked out for, the way it has been implemented I am sure even the Prime Minister is not happy,” Mr Kanoria said, adding, “It (demonetisation) will disturb the current scenario. It will have an impact on the GDP.”
Sharing the ground-level scenario after the scrapping of Rs 500 and Rs 1,000 notes and the ensuing cash crunch, Mr Kanoria said jewellery firms have been hit hard whereas the consumer goods area and small and medium enterprises have also been impacted.
Asked whether the earnings of corporates will take a hit, at least in the ongoing and next quarter, Mr Kanoria said: “Some of the businesses, yes. Businesses which are directly linked to the consumer will get some impact.”
The Assocham president pitched for “major tax reforms” for demonetisation to have the desired results in terms of checking black money and corruption, observing that the coming Budget “will be very, very crucial for this government”.
“They need to slash tax rates to such an extent that it does not allow or provides disincentives to people who create black money,” Mr Kanoria said.
Elaborating, he said the Rs 2.5 lakh income tax exemption threshold should be increased to Rs 5 lakh whereas between Rs 5 lakh and Rs 15-20 lakh the levy should 10 per cent so people do not feel the pinch.
Mr Kanoria said the average rate of Goods and Services Tax (GST) should be lowered to 15 per cent from 18 per cent.
On whether he sees job losses in the economy in the short to medium term, he said: “In unorganised (sector), which is the daily wage earner, there will be some impact at the moment… The sales will get affected so they (vendors) will not be able to pay on a daily basis. The small, unorganised sector of the economy will have some impact.”
He also said the deadlock in Parliament “does not augur well” and political parties need to be more mature.