Mumbai: IMC (Indian Merchant Chamber) whole – heartedly endorses the bold initiative taken by the Prime Minister to curb the menace of black and counterfeit money which was eating into the vitals of Indian economy. IMC is of the view that:
• The demonetization announced on 8th Nov is a brilliant step to curb the parallel economy which by conservative estimates accounts for 30% of India’s GDP.
• With money being deposited in the banks, the banks will soon be able to reduce interest rates and thus all sectors of the economy – especially the MSMEs will be benefitted to a large extent. However, the speed at which the banks actually reduce rates and pass the benefits in the economy is to be seen.
• The move will also reduce the artificially inflated real estate prices. We expect corrections in the real estate market especially in metros like Mumbai, Delhi and Bangalore to the extent of approx. -25% over the next six months. The housing sector will also get a boost due to reduced EMIs which will happen once the banks decide to pass on the benefits of lower interest rates to the consumers.
• This measure will also help in India becoming a cashless society and give a push to financial inclusion. For example, the JAN DHAN YOJNA is encouraging people to open bank accounts and enter the mainstream of banking. To promote Digital India, and encouraging digital transactions, government has been advising banks to invest in digital banking and expansion to rural areas. Though this may take some time, the foundation for a near cashless society is well laid.
Reflecting on the issue, Mr. Deepak Premnarayen, President IMC said that “while there might be small inconveniences in getting the currency exchanged by standing in long queues and at odd hours in front of banks and ATMs, it is only a transitory phenomenon. These inconveniences are due to the fact that around 10-12% of GDP is cash operated as against 4-5% in developed countries. Once the dust settles down on operational inconveniences, the economy of the nation is poised for a renaissance for all sectors”