Demonetisation Drive – Restructuring the Indian Economy and its Impact on Businesses

A woman holds 500 and 1000 Indian rupee banknotes as she stands in a queue to deposit her money inside a bank in the northern city of Kanpur, India, November 10, 2016. REUTERS/Adnan Abidi

Since the last few weeks, sights of chaos and intolerance has been seen amongst the common masses. People are standing in long queues to get their money exchanged or deposited in banks. On the other hand, the ones with the black money are under water with their huge lot of collected amount, worried about being exposed. As such, All these are resulting from a single decision – discarding of older versions of 500 and 1000 rupee currency notes.

The bold step of demonetising 500 and 100 rupee notes in the country, is a fight against corruption and black money, which was much needed. This is a big change and has affected almost each and every industrial sector, both positively and negatively. While jewelry and banking sectors will be greatly benefited; real estate owners, sales, and business of luxury consumer items will have adverse effects of the same.

Influence of demonetization on different business sectors

  • Dream of owning a house will turn into reality – It is true that the unorganized real estate business will take a toll, lowering the market value. The number of buyers will fall down and this will affect the prices. It will definitely bring good results for the business prospects but initially cement and ceramic sectors will be affected. However, like a coin has two sides, the other facet of this scenario, brings in a good news for buyers. As the prices of properties will come down, people will get fair opportunities of buying their dream house.
  • Banks will have huge funds with increasing deposits – Huge amount of cash is actually in circulation that will be brought in the form of deposits by the banking system. This will increase the bank funds, as a portion of the collected money will be deposited in the current and savings account (CASA) deposits which, in turn, will lessen banks dependence on borrowing higher amount. Thus, deposit deployment has become a challenge in the short and medium term thereby reducing deposit rates.
  • Business owners will maintain genuine records – Demonetisation will result in better maintenance of accounts by both small, mid and large business firms. Majority of businessmen will make sure that they have genuine records of their annual income to avoid any mess with the IT department in the future.
  • E commerce business has got a positive push – Entrepreneurs owning online business are greatly benefited with the changing scenario. The ban had helped them get the long term pay-offs and digital payment is getting more awareness, as the shortage of cash had lowered the cash-on-delivery orders. This has ultimately offered a positive push to the eCommerce business companies.

We cannot ignore the fact that presently, the scenario is implying adverse effects on various sectors but, eventually we will have an organised and stabilized economic system with no counterfeit currency in circulation. This move will block the existing black money and eliminate fake currency. We, as common mass will have to bear the present consequences, as actual development is a long-term process and it cannot be achieved overnight. There is no doubt that we are heading towards a better and stronger INDIA!