It has been one week since my last post, Demonetization has gone to next phase where 2000 notes are now available from ATMs (Metros cities at least) and lines have started reducing in certain places - saw Bhopal in one of the news channel yesterday.
News of blacks money caught in various states are coming everyday and experts are commenting that there could be 2 Lakh crore rupees which may not come to market at all, leading to substantial reduction in M0 and then M3. Inflation is definitely going to come down and there are other changes that we may soon start to notice -
- Pick up in Non Cash Transactions - E-Wallet/Debit/Credit/On line payments will see jump and more business.
- Banks will have more cash which will lead to reduction in interest rates/deposit rates.
- Reduced inflation will also make good case for reduction in interest rates.
- Credit off take will pick up since Banks have to lend to make up for the increased cost by way of interest that they have to pay on deposits.
- Tax compliance shall improve as people will fear further such moves by Govt. Increased tax collection may reduce tax rates and will also improve overall balance sheet of Govt.
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