Demonetisation-Its Effects On The Economy

There cannot be two opinions that the monster of black money has, over a period
of time, grown in strength, eaten into the socio-economic and political fabric of the
country, and, therefore, needs to be attacked lock, stock and barrel. This has not
even been attempted in India for one reason: An absolute lack of political will
from the ruling establishment. So demonetisation should be viewed as a wellintentioned
and decisive step that will strengthen India’s fundamentals and keep
delivering results in increased growth for a long time to come.

• Before Demonetization there were 17,165 million pieces of Rs 500 notes and 6,858
million pieces of Rs 1000 notes in circulation on November 8, the day Prime
MinisterModi made the announcement of demonetizing the two high
denomination notes. The total amount of high denomination currency circulating
in the system on that day was, thus, Rs 15.44 lakh crore (Rs 8.58 lakh crore in Rs
500 notes and Rs 6.86 lakh crore in Rs 1,000). As per the latest reports nearly 12.5
lakh crorehas been deposited into the banking system. Out of this only 20% was
circulating by banking systems.

• Demonetization can be considered a big success if for the next three financial

years, the government is able to retain 60% of this money with banks and rotate
the same through banking system only. The same money can be used to provide
loans to industries. This will, in turn, lead to a lowering of interest rates owing to
the compulsion of banks to utilize the surplus low cost cash they are holding.
Businesses that are not viable because of high interest rates will advance and
others who are just surviving will become profitable. It will give a big boost to our
economy.

There cannot be two opinions that the monster of black money has, over a period
of time, grown in strength, eaten into the socio-economic and political fabric of the
country, and, therefore, needs to be attacked lock, stock and barrel. This has not
even been attempted in India for one reason: An absolute lack of political will
from the ruling establishment. So demonetisation should be viewed as a wellintentioned
and decisive step that will strengthen India’s fundamentals and keep
delivering results in increased growth for a long time to come.

Union Finance Minister ArunJaitley listed out an increase in the volume of digital
transactions, widening of tax base and squeezed circulation of high denomination
currency as the real measures of the success of demonetisation.

With the cancellation of Rs.500 and Rs.1000 currency notes, e-wallet companies

such as Paytm, PayU India, Mobikwik, etc. are witnessing a sudden rise in their
daily transactions. Demonetisation will also have an impact on the hiring needs
and other business functions of these companies. Even app-based cab companies
are launching their promotional materials to encourage cashless transactions.