Pros and cons of demonetisation

It is almost one month of demonetization of Rs 1000 & Rs 500 currency notes in India. Masses are still struggling to withdraw cash as banks and ATMs are still running dry. Long queues at the banks are getting longer day by day.  This demonetization driven cash crunch is hitting hard small-medium businesses and public at large.

Still, masses at large appear to be hopeful of a better future that will emerge from this churn out. Now, let’s try and understand the pros and cons of demonetization that will affect a typical middle class Indian.

Advantages

1. One time pull out of black money from all sectors will bring tax payers on a level playing field.
2. Lesser outflow of savings in real estate and gold and increase in deposits in mutual funds, stock market, banks and other financial  services. As a result cost of real estate is likely to be rationalized.
3. Interest rates on loans should come down in future as financial institutions will be loaded with cash.
4. More acceptance of plastic money and online payments will make day to day shopping hassle free.

Disadvantages

1. Long queues in banks for basic banking operations like deposits and withdrawals. It appears, the system will take a long time to come to normal.
2. Long queues again in ATMs to withdraw money. Even this is likely to continue for months.
3. Businesses in unorganized sector will continue to suffer for paucity of cash.
4. Hoarding of money might increase in future with Rs 2000 notes bringing in shortage of liquid cash in long term.

Note:

This article is purely written basis personal limited knowledge and experience and it is not intended to be pro or anti demonetization.

image courtesy: financial express

image courtesy: financial express

image courtesy: mid-day