Demonetization- The Good in Disguise

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A history was created in the great saga of Indian Economy on 8th November 2016, when the Indian Prime Minister, Narendra Modi, announced the withdrawal of Rs. 1000 and Rs. 500 from the list of legal tender. This created quite a stir in the public and they stood divided on the view if Demonetization is good or not worth the trouble.

Yesterday, Nandan Nilekani, who shaped the world’s largest biometric database with India’s Aadhaar project,in a statement supported the step and stated certain points on how Demonetization will prove good for India. He is confident that the government’s ban on 500 and 1,000 rupee notes will ensure that financial inclusion rises. Mr Nilekani, co-founder of IT giant Infosys, predicated that digital transactions will shoot up considerably in the next 3-6 months to a rate that would else have taken 3 to 6 years. He also said that any short-term retrenchment in economic growth will be compensated for very quickly with digitization. A lot will depend on the next three months. If the digitization is accelerated long-term, it will be a very good development and will benefit everybody. According to him the demonetization drive will accelerate the roll out of digital financial services in India supported by Aadhaar, UPI, USSD and micro ATMs.

He also said that the more important thing is when the economy becomes formal, when everybody’s financial transactions are digitized, India is going to go from data poor to data rich and that will make it more and more complex for people to do dishonest things or to be outside the system. This will reduce the amount of black money in the system.

The Highlights:

• A big step for financial inclusion.
• The long journey of getting Indians into formal economy will be accelerated.
• Economic growth will bounce back.
• The currency ban will give a boost to digital transactions. It has its own set of long-term benefits.
• India’s growth will come from services and digitization.
• India will move from being a data poor-to-data rich country.
• Digitization will compensate for the short-term slowdown and adoption of technology will lead to long-term benefits.
• Unified Payment Interface will benefit the country immensely.
• The notes ban shock to the financial system will also extend to the political system.

Other Benefits:

• Fake currencies out of Circulation.
• Cash with terrorists and terrorists group wasted.
• No riots especially in Kashmir due to lack of funds.
• Jan Dhan Accounts operational
• Mobile ATMs for hospitals

Nifty after Demonetization:

On the day of Demonetization, Nifty share price was trading at 8543 Level. After the shock of Demonetization and Election of Donald Trump as US President, Nifty50dropped to 8416, slipping by 128 points then pulled up 17 points to close at 8432 level. Nifty reclaimed its 8,500 level as it traded at 8526 on November 10th before losing 417 points in three trading sessions to close at 8109 on November 15th, lowest close in nearly four and a half months, mirroring the weakness in Asian shares. Ever since, the Benchmark Index Nifty has failed to reclaim its 8500 level and is trading at 8100 level. It has maintained its Brexit low and is taking support of 8000 Levels.

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