In a move to clean up the economy, Prime Minister Narendra Modi has announced demonetization of Rs 500 and 1000 currency notes with effect from November 8 midnight, making these notes invalid in a major assault on black money, fake currency and corruption.
The move is described by experts as “very bold” and “path-breaking.” They said the task of taking out black money from easy circulation, which was so complicated, has now been resolved with one stroke.
The government’s decision to scrap Rs. 500 and Rs. 1000 rupee notes has however created panic among the common man.
1. The step will be a big problem of people with illegally earned money as they will be afraid of deposit it in a bank. People having crore of black money, cash, earned through ways such as corruption and smuggling, will have a tough time dealing with the situation.
4. Reduction in total currency circulation in the economy will lead to deflation, a decrease in the general price level of goods and services.
6. People who have a lot of legally earned cash will deposit in the bank, leading to rise in bank deposits. This will make loans easier and could lead to a possible reduction in interest rates.
The new Rs 2000 note dnaindia
7. This will also lead to a crash in home prices since most buyers in real estate are doing the transactions in black money. Since now the buyers will have use white money in buying homes, the demand for the land will go down further leading to downfall in its price. And because of lack of potential buyers, people will start selling at lower prices. Though it will not impact the primary residential segment as the buyer in this sector are driven by mortgage, the secondary market will take a hit and the unorganised developers community where there were still cash dealing.