Prime Minister Narendra Modi recently moved ahead to demonetize high-value currencies in November 2016 in a calculated approach to eradicate black money from the country. INR500 and INR1,000 notes became invalid – these account for 86% of currency in circulation.
Amidst the immediate effect on consumption, sectors incurring major setbacks Include real estate, construction, jewelry, high-end retail, travel and tourism.
However, the long-term economic benefits include Higher tax revenues that will create a better business environment with higher transparency and minimized corruption. Banks will see large inflows. Inflation may trend lower leading to drop in interest rates.
Are there unforeseen ramifications of demonetization in India?