Demonetization will be positive if government uses the

Demonetization
is set to have an enduring impact on India’s economy and identity. The
government worked hard to strengthen financial inclusion to get consumers to
pay their taxes online and to force government departments to invoice
digitally. According to finance Minister around 270 million new bank accounts
were opened. Many bankers commented, it has opened up new markets, strengthened
financial inclusion and brought new section of the population into the formal
economy. It is not easy for a fully cash dependent business to migrate to
digital all of a sudden. It will take time to return to normalcy. It will
probably help the digitalization of economy as well as the banking sector.   It
will be positive if government uses the income or revenues to provide
additional facilities to the people who lost purchasing power. It is true that
that the demonetization and collection of more tax are likely to have negative
impact on the consumers. In a way we can comment the decision was good for
India for it helped in merging informal economy to formal economy.  Importantly, Q3 growth at 6.6 per cent was
only marginally lower than that recorded in Q2 6.7 per cent, thereby suggesting
that demonetization had only a modest impact on growth in Q3 of 2016-17. (RBI).

 

Organized sector

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It
is true that the organized sector on the whole remained resilient during
demonetization but some manufacturing and service sector were affected. The
organized sector will enjoy the benefit of demonetization in India.

There
are four kinds of transaction in the economy. They are accounted transactions,
unaccounted transactions, informal sector transactions and illegal
transactions. With banks being flush liquidity, we anticipate a major reduction
in interest costs that which argues for the growth of the industry. When we
evaluate the manufacturing sector demonetization affected it very evidently.
The sale of fast moving consumer goods and the vehicle industry was affected
severe. All manufacturing unit cut down its production during this period. This
affected the employees. Usually the price of consumer goods at the time of
festival goes up but due to demonetization in 2016 even in when it was not in a
period of festival there was a hike in the price of goods. According to the
Centre for Monitoring Indian Economy new investment proposal dropped to Rs.
1.41 trillion in Q3 against an average of Rs 2.36 trillion in the preceding
nine quarters. The demonetization pulled down the economy of construction,
transportation, real estate etc.