Demonetisation effect on Bengal’s economy: ‘Possible shortfall of Rs10,000 crore’

CM Mamata Banerjee had earlier claimed that the state had lost Rs 5,500 crore after the state’s move.

By: Express News Service | Kolkata | Published:January 9, 2017 5:38 am

West Bengal government officials on Sunday said the Centre’s move to demonetise high denomination currency notes had crippled the state’s economy. The result – a “possible shortfall of Rs 10,000 crore by the end of the fiscal”.

Following a resolution at the BJP national executive meeting on Saturday in New Delhi, Commerce Minister Nirmala Sitharaman said the figures for November show that “revenue and income of all states, except perhaps Bengal, had shown a rise post-demonetisation”. Asked about the West Bengal reference, she clarified that while the finance minister did say while introducing the resolution that there had been an increase in revenue, he did not mention Bengal but made a reference to what good governance can achieve.

CM Mamata Banerjee had earlier claimed that the state had lost Rs 5,500 crore after the state’s move.

“The problem is primarily because unlike other states in India, Bengal’s economy is dependent on collections from excise, sales tax and commercial tax,” said a government official. “In the past few years, the state had faced a revenue shortfall till the second quarter, but had picked up after the festive seasons that begins with Durga Puja in October and continues till January. This wasn’t the case this year.”

The other aspect that the government is worried is with regard to the fiscal deficit.

CM Mamata Banerjee had said that in the year 2016-’17, the government had to pay over Rs 36,860 crore for loan repayment and that this would rise to Rs 47,000 crore in 2017-18 and to Rs 51,000 crore in 2018-’19.

“We are looking at a possible shortfall of Rs 10,000 crore,” admitted a source. He added, “The state government had missed the revenue target in 2015-16 by Rs 3,500 crore. This years, it is 14 percent higher than a year ago. With demonetisation, it looks even more difficult since revenue has taken a massive hit.”

The dire situation has already promoted the Bengal government to allow out-of-court settlement – for the first time in 13 years – over disputes regarding business entities tax arrears, presently totalling Rs 6,200 crore, after accepting a part of the amount, said officials. The West Bengal Taxation Laws (Amendment) Bill, tabled and passed earlier in December empowers the finance department to settle disputes after accepting 30 to 60 per cent of the tax arrears.

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