Prime Minister of India Shri Narendra Modi on Nov.8, 2016 has banned Rs. 500 & Rs. 1000 currency notes with immediate effect. This is a great step for curbing black money and dirty money.The decision was taken to prevent the illegal financial transactions such as fake currency and money laundering which has been India as a whole for years.What will be the impact of this Demonetization on Indian Economy.
Dear Sanjeev,
No serious cause for concern and how it will affect the monetary system in the country and the economy as a whole.
The concerns come from the fact that global commodity markets recorded a fall in oil prices and weak demand for some commodities such as rice. India is the second producer of rice in the world after China. Demand is still weak. The compensation will be at the expense of demand for other working materials of which India can only win.
The focus of the Indian economy is geared towards sustainable macroeconomic stability, placing the fiscal deficit and current account deficit. Inflation is under control and has limitations in terms of short-term capital inflows in the country. The country has sufficient reserves compared to previous other economic shocks and can cope with any situation.
However, the challenges remain!
Best regards,
Snezhinka
Dear Sanjeev Bansal jee. Namaskar. Thanks for the question of common interest to many people on this network. Agreeing with Snezhinka Konstantinova, I would like to state that the India government's measure aimed at controlling money laundering and corruption awaits to witness expected results which must there in store. Yet, things are much complex in this part of the world than most other parts, as Indian currency is also in general use as the alternative transaction currency in Nepal and Bhutan that share porous, open borders. The reality offers a unique situation (or even problem) in this part of the world that other non-South Asians might not understand well. Because of the open border and permission to use Indian currency as the alternative transaction currency in Nepal, there is a mammoth amount of such currency notes in Nepal. Nepal's central bank Nepal Rastra Bank has reported that its formal banking system holds the IC 500 and 1,000 denomination notes of at least 33.6 billion Indian Rupees; it does not include almost equal amount of such 'demonetised' notes being held by Nepalese general public and businessmen. India's RBI is yet to instantly address the grave problem the demonetisation caused to Nepal. Nepal-India bilateral trade is also likely to suffer as there is big chaos and confusion. Hope the situation will improve very soon.
Thanks Snezhinka Konstantinova or the informative reply.
Thanks Arhan Sthapit Ji for the informative reply.