Impact of demonetization on Indian economy is something worth investing your time on. Demonetization Impact has been the talk of every town for quite some time now.
In this series of articles, we will try to explain the Demonetization Impact on the Indian economy in detail. Let us explain all the Pro’s and Con’s one by one to help you stay updated.
Demonetization Impact Pro’s
Huge Blow to Black Money
Black money, that was stored in the form of Rs 500 and Rs 1,000 notes is now out of our financial system.
As of 23 December, the PMO received around 700 calls, giving information about black money holders and the PMO office forwarded this information to various law enforcement agencies for further action.
As of December 28, official sources stated that Income Tax department detected over ₹4,172 crore of un-disclosed income and has seized new notes worth ₹105 crore as part of its country-wide search operations.
End of Terror funding
The government stated demonetization as an effort to stop counterfeiting of the current banknotes allegedly used for funding terrorism. Fake Indian Currency Notes (FICN) network will be dismantled by the demonetization measures.
Taking out 500 and 1000 rupee notes out of circulation will have a lasting impact on the syndicates producing FICN’s, thus affecting the funding of terror networks in Jammu and Kashmir, North-eastern states and Naxalite hit states.
Government also said that fake currency notes were used to fund terrorist activities against India and demonetization had a counter-terrorism purpose.
End of Hawala Transactions
The Hawala Racket, which is widely dependent on cash has got a major blow.With this ban , the unethical Hawala traders will suffer badly as most of the cash was flowing in 500 and 1,000 denominations.
End of Huge Donations
Huge donations, that is taken in private education, healthcare, training institutes and many other sectors will be stopped (may be temporarily).
Schools, engineering, medical colleges and hospitals ( private ones) used to take huge amounts of money as donations for admissions, eventually leading to a corrupt education sector.
Real estate may see significant course correction
This decision will help institutionalize the real estate sector bringing more transparency in the Indian real estate industry. This step would give the Indian real estate sector more credibility making it more attractive to the foreign as well as domestic investors.
The demonetization decision is expected to effect the real estate market badly. Resale transactions in the real estate sector often have a significant cash component as it reduces incidence of capital gains tax.
Black money was responsible for sharp appreciation of properties in metros. Real estate prices are expected to go down sharply.
Fair Elections leading to Political parties in crisis ahead of polls
With five state elections to be held in 2017, demonetization was a hard hit to almost all the political parties. Especially, in major states like Punjab and Uttar Pradesh, where cash donations are considered a huge part of “election management”.
It’s no surprise that many political parties have strictly opposed this decision and some parties have even led protests trying to put pressure on government to revert the decision.
Moving towards digital payments
Demonetization resulted in more and more people switching to virtual wallets like Paytm, FreeCharge and many more. This proved as a game changer for the startups involved in the digital payment sector. There daily transactions doubled and tripled overnight.