As we all know, the Modi government recenlty banned the 500 and 1000 rupee notes in an effort to demonetisation. It is a very calculated risk and may have a long term impact on the Indian economy, monetisation, interest rates, inflation, deflation, GDP, production and taxes.
Let us try to understand what common people of India may witness once all this is done after 30th December 2016.
POSITIVES of Demonetisation and Banning 500 and 1000 Indian Rupee notes:
1. Decline in PRICES. Many items price may decline in the next 3-8 months after 30th December.
2. Relief in tax slabs. I expect an increase from 2.5L to 3L minimum. And 80C limit may also be raised by 25-50K.
3.Home loan rates to come down.
4. Easy loans by the banks.
5. Many areas will witness decline in prices and now be within common people reach. The most important one is Housing. Property prices may decline.
6. Indian Rupee value to improve, meaning a decline in USD/INR exchange rate, which will impact may sectors.
A few NEGATIVES of Demonetisation
PS – These are not really negatives, but a few people who does not understand how interest rates work may consider these as negatives.
1. Savings, FD, and public savings interest rate to decline by around 1-2% min.
2. I am worried India may witness DEFLATION for some time forcing RBI to reduce repo rates sharply.
3. People relying in interest earnings may be hit badly in the next 1-2 years.
4. PPF and NSC may see a decline as well since interest rates may be reduced.
5. Rise in stock market volatility.
And many more, which are hard to pen down at the moment..
Note – This is my personal view and not a prediction or forecast.
Happy Money Exhange 🙂