The cash transaction limit of Rs two lakh has affected trade in agricultural mandis and traders have complained that the resultant sluggishness has pulled down commodity prices as well.
The Union budget had proposed a cash transaction limit of Rs three lakh and a recent amendment to the Finance Bill brought it further down to Rs two lakh. The amendment comes amidst reports that digital transactions had declined after an initial spurt post demonetisation. The Rs two lakh limit applies to single transactions, those in aggregate from a person in a day, and to those relating to one event or occasion from a person. The provision does not apply to the government, banks and post offices.
The cash limit has affected trade in agricultural mandis across the country, which are mainly driven by cash transactions, said Ritesh Kumar Sahu, fundamental analyst, agri commodities, Angel Commodities.
“The limit is being implemented since April and several Rabi crops have been arriving in the market in the past few weeks. Traders largely stock up the commodities during the arrivals and this ensures that demand remains intact in the physical markets. This time the sluggish in buying on the part of traders is affecting demand,” he said.
“Farmers largely deal in cash and many are reluctant to accept cheques or digital money. Those from the interior parts of the country do not have easy access to banks. Once the small traders are not able to procure the commodities from the farmers, the entire supply chain gets affected. This has also affected the prices of commodities in the past few weeks,’ said Pinkesh Vyas, owner of Mumbai-based wholesaler of spices, Maganlal Shivram and Company.
According to Sahu, most of the Rabi crops like coriander, turmeric and RM seed are currently arriving in the markets and the prices of these commodities are down in the past several sessions. Turmeric prices have been coming down since March. Though jeera has been steady in April, it has fallen 6.5 per cent in the past two days. Similarly, coriander and RM seed prices too have been coming down.
“Besides the IMD predictions about the monsoons, the cash limit also could be a reason behind the falling prices. Once the farmers become comfortable transacting in cheques, this situation will ease. Farmers are being brought under the banking system and their subsidies are being sent through bank accounts,” said Ajitesh Mullick, assistant vice president, retail research, Religare Commodities.
sangeethag@mydigitalfc.com
