Hyderabad: A Central team headed by IAS officer Reddy Subrahmanyam, which visited Telangana state recently, has reported to the Centre that the state's rural economy had been badly hit by demonetisation. According to top sources, the committee reported that the overall finances had seen a drastic fall. On the positive side, banks had conveyed that their non-performing assets had come down by almost 30 per cent and many gold loans were getting repaid.

The report said that there was a "scarcity psychosis" among people leading to hoarding of Rs 100 notes, which was having an adverse impact on liquidity. The team assessed that agriculture produce was being sold at lower prices at market yards due to non-availability of cash, and wealthier farmers were not bringing produce to the market at all. Small farmers dealing in perishable items like fruits and vegetables have been badly hit.

There was havoc in the cotton plantations as no wages have been paid to workers. Daily arrivals had plunged to 30,000 to 40,000 bales against the usual 1.5-2 lakh bales at this time of year and prices have increased by 9 per cent in a week, pushing up global prices in turn. Paucity of funds had affected the procurement and delivery by traders as well as official procurement as the officials are depositing the money in bank accounts and farmers are unable to withdraw the same from their respective accounts.

Though weather conditions are favourable for sowing, the report has pointed out that no one has yet begun sowing the Rabi crop. Operations in business establishments in rural areas were subdued. The local power loom industry has also taken a major hit. The second and third tier workers in the sector who function largely on cash have been the worst hit. Overall, the state's finances have seen a drastic fall, and the state could lose Rs 3,000 crore.

There was also a marked increase in deposits in Jan Dhan accounts. However, credit off take from banks has seen a dramatic decrease despite the onset of the Rabi season. On the request of the state government, the team recommended that instead of printing currency notes of `2,000 denomination, currency notes of Rs 500 and Rs 100 should be quickly printed and disbursed to increase liquidity.