Black Money – Domestic and International Efforts

Economists see ‘short-term pain, long-term gain’

  1. The govt’s demonetisation drive will likely negatively impact the economy in the short term
  2. But it could help over the longer term propel economic growth into double-digit levels
  3. Reason: As more of the informal economy becomes formal and the GST comes into effect
  4. Benefits: The NPAs of banks will go down as the cash coming in will lead to higher CASA (current account, savings account), in turn declogging the system
  5. Interest rates will come down because the money will go to the banks and to some extent some of it will go to the government as taxes
  6. The overall economic impact would include a likely appreciation of the rupee and a sharp slowing in inflation
  7. The banking system getting a boost and real estate prices falling about 20-25 per cent before stabilising

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