Discontinuing usage of either of Rs 500 or Rs 1000 notes can significantly increase the physical risks of holding black money [What we have seen is, weight of Rs 1 Crore in the form of hard cash rises from 12kgs to 100kgs if the denomination of the sum is changed from 1,000-Rupee notes to 100-Rupee notes]. In line with these expectations, the Government banned Rs500 and Rs1,000 notes. Modi-led NDA Government is committed to the crackdown on black money.
The Key takeaways from this call of demonetizing existing currency notes – (1) this move reflects the NDA’s strong resolve to curb the size of the black economy; (2) the decision came as a complete surprise for most and the finesse with which the decision has been executed reflects the Government’s meticulous execution skills never seen during the Corrupt Congress regime; (3) the move is likely to result in windfall gains for the Central Government to the tune of ~3% of GDP over a period of time; and (4) the sectors most adversely affected by this move will be real estate and lenders having significant exposure to Loans Against Property (LAP).
Whilst this will help lower the cost of debt capital in India in the long term (by forcing the white money supply to increase), in the short term this is likely to cause economic activity to freeze with India’s black economy estimated to be ~20% of the size of India’s GDP. Demand for real estate and big-ticket consumption is likely to be hit most profoundly.
The Amount Lying with Corrupt Congress Politicians and Bureaucrats backed by them will go to the Drains as Narendra Modi led Government has developed the World’s Finest Analytics to track Cash Movement starting today for old Currency Notes as well as new Currency disbursed through the banking Channel.