Demonetisation may spell doom |
National Institute of Public Finance and Policy (NIPFP), a think tank affiliated with the finance ministry, has warned that the shock move to demonetise Rs 500 and Rs 1,000 currency notes could lead to “a contraction of economic activity in the economy” and social unrest. The decision to scrap high-value notes that accounted for 86% of the currency in circulation has triggered cash chaos. People have been forced to line up for hours, sometimes overnight, outside banks and ATMs to get cash across the country.Realty, gold and the informal sectors have been hit the hardest as they rely heavily on cash. The situation is worse in villages where a large number of people are unbanked.The move has united the opposition, drawn criticism from experts, the public, and even the Supreme Court that said the problem was very serious and that “the country will have riots on the streets”.It added if the extinguished cash is being used in accounted transactions and the informal sector, then the impact on the economy could be substantial, resulting in a closing down of these activities.
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