Demonetisation: So far and beyond
Its been just a few days and the shocks of cash constraints is still haunting us and if reports say it right, it may continue for a few weeks to come. That's the kind of ripple effect getting created in the economy wherein salaried classes are happily giving an evil smile to their business counterparts. A quick look at what has been the story so far:
1. The panic withdrawal of 500 and 1000 rupee notes getting the best of the critic ratings and simultaneous introduction of 2000 rupee note.
2. The ambiguity of exchange and withdrawal- per day, per week and the starting day of the week for this consideration. ( 4000 exchange value and 10000 withdrawal value )
3. The withdrawal limit - being same for savings account and corporate accounts . Really?
4. The dry days of cash- extra long queues, unequipped ATMs, unrest amongst bank employees and many more.
The situation so far has been something like this with unrest among common citizens continue to be the major talk of the town. What unfolds in days to come will have a huge and enormous impact on the plans designed for this purpose. A proper utilization of the fund will definitely boost the growth of the economy.
Lets see the possibilities:
1. Banks are flooded with money and be rest assured they wont need more borrowing at least in the coming months Expect a dip in FD rates and thus a drop in loan rates too.
2. General cash market transactions and commodity transactions will continue to feel the heat. Kirana stores, cab drivers, road side vendors, who form a significant part of Indian work force have already stopped taking 500 and 1000 and this will surely increase the heat. A negative impact on the disposable income and thus a negative GDP impact.
3. Uncertainty is always negative for the share market too and sectors linked to un organised economy will feel the brunt.
4. Financial and technological services will gain in the long term and as the trend shows that large denomination purchases will be made through electronic mode, we can expect a big impact on the retail sector too.
5. We may see complete change in spending patterns as we may see a metamorphosis towards a cashless economy.
5. Notes in circulation will decrease and this may bring in an appreciation of the domestic currency.
6. On the long term effect, the govt is sure to receive a thumbs up for this move and many more countries would see this as a viable option to adopted in their economy as well. The move will be considered quite significant showcasing the boldness in tackling the issue.