Demonetisation was a necessary step, says US

Adi Godrej Optimistic On Manufacturing Sector Growth Job Creation

India's richest tycoon Mukesh Ambani on Thursday threw his weight behind Prime Minister Narendra Modi's demonetisation move, saying in a single stroke all unproductive money has been brought into productive use.

Modi has sold the move as an attack on the illicit "black economy", it is also aimed at shrinking the cash economy which has lasted so long because few Indians have bank cards and infrastructure for online transactions is poor.

Gross domestic product (GDP) INGDPQ=ECI clocked an annual 7.3 percent growth between July and September, faster than 7.1 percent in the previous quarter and higher than China's 6.7 percent. "You have a leadership role to play in taking India towards an increasingly digital economy".

Another casualty has been one of Delhi's oldest gold markets, which has temporarily closed after tax officers raided jewellers across the country on reports of a gold buying spree following the currency ban as people tried to turned their cash into gold.

But the most pessimistic forecast, from Mumbai-based brokerage Ambit Capital, for a precipitous drop to 3.5 percent growth shows just how anxious people are. Any individual or business holding these bills would have to exchange them for newly created 500 and 2000 rupee paper currency at a local bank where a record will be created of the transaction.

After Modi announced the demonetization of currency, opposition parties have been targeting the NDA Government and raising public issues in front of Government.

Many Indians living in the United Kingdom are reportedly scrambling to bring or send the scrapped Rs 500 (£6) and Rs 1000 (£12) banknotes home as the deadline for getting rid of them draws closer.

While large companies such as Hindustan Petroleum Corp. make 99 percent of their pay outs electronically, it still needs to work out a system with smaller sub-contractors, said finance director J. Ramaswamy. And business owners can not get enough of the new money to pay their workers.

More than 70 per cent of the PoS terminals are installed in India's 15 largest cities, which contribute to more than 75 per cent of transactions, says the Ernst & Young report. But it has led to a severe cash crunch in the economy, hurting several sectors and consumption. As a result, the area under cultivation for India's winter crop has declined. Private economists, however, reckon the impact would be felt through 2018.

Fitch Ratings lowered India's GDP growth forecast for the fiscal year ending in March 2017 to 6.9% from 7.4% to reflect "temporary disruptions" to economic activity after demonetization. That's below the 8% expected by analysts.

The dollar has surged nearly 4% since 9 November, after Trump's victory raised expectations his promise of increased infrastructure spending and tax cuts would lead to higher interest rates from the Federal Reserve. Services Purchasing Managers' Index is due on December 5 and the central bank will review interest rates on December 7.

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