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What Would Be The Major Effects Of Currency Change On The Indian Economy?

In the history of India, this is the second time demonetization of currency happened in India. On 8th Nov 2016, Govt of India came with a circulation to demonetize Rs 500 and Rs 1000 to control black money, that was creating hindrance in economic development.

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The devaluation process headed by our honorable Prime Minister, Narendra Modi, was a real shock to every Indian citizen. I'm not at all exception to it. The demonetization of Rs 1000 and Rs 500 currency notes, declared by our PM on November 8, completely shook the whole nation in no time. The venture is regarded to be effective for controlling the black money that could create hindrances in India's economic development. Other two evils for which Modi Ji took this initiative were the country's corruption and terrorism. The negative impact could even have snatched the tag "World's fastest growing economy". So, this sudden revealing of the fact was nonetheless advantageous for the country.

The historical decision to ban the currency notes was made for totally eradicating the black money supply. The country's betterment is the chief reason that has driven the authorities to make such proclamation. Quite obviously there is a full suite of edges for which the process has come into effect. Let's have a look at them. After all, being an Indian, we all must stay aware of the worthwhile facets, which are going to be reflected through the devaluation method.

Beneficial sides of demonetization

In accordance with a research, the black money market in India is about 20% of the total GDP that is undeniably high and poisonous for any economy. The action was sincerely taken to control as well as prevent the anti-social or illegal activities including terrorism, black money or fake currency transaction and corruption. The measure is completely appreciating as the black money holders got no way to hide their flaws. On the other note, circulation of fake money would be stopped, which is nevertheless advantageous for the entire country.

On the other hand, being an Indian citizen, we can never ignore the positivity that is going to be reflected in the near future because of this outstanding move. Well, this is not all as there are some other aspects that need being discussed while explaining the impacts of currency devaluation. Let's take a glance now.

Impacts on the share trade

Quite naturally, Indian share and stock market has to experience some sorts of differences due to this action.

* Indian Shares have declined to some extent than the other Asian share markets
* Clear effect is seen in the small and medium sized stocks and some sectoral indices
* Stocks of small and medium finance companies have also fallen

Effect on the Indian Economy

This action has shaken the entire Indian economy to some extent. Being a citizen of India, you should be well-informed regarding these issues.

* Effect on Demand and Prices

The demand is definitely going to be impacted slightly and it would be reflected through the changes in the prices of some commodities. Gold and other luxury goods, consumer products, property and real estate, automobile industries are going to face some differences due to this decision.

The prices of consumer goods would fall down and the prices of the property and real estate would also decline for a short period because of this bold and historic decision.

* Effect on the Parallel Economy

Parallel Economy is also expected to be impacted. Black money would be removed completely and funding for the illegal activities is going to be obstructed.

* Effect on the Money Supply Process

Yes, the money supply procedure will experience disturbance and it will continue until the circulation of money supply gets widely spread. Well, the government expects that it would be under control in no time.

* Effect on other Economic Entities

Other economic sectors including agriculture, small trades, SMEs, retail outlets, political parties, service sectors will face short term disruptions. In fact, these fields are regarded to witness noticeable changes.

* Effect on the Rural Economy

Even in the age of technology a great many villages of our country are bankless. Currency transaction is the main way there and without any doubt, a drastic impact would be seen on the rural economy.

* Effect on Banks

The banking sectors can utilize the increased liquidity in future for the lending procedure as individuals will deposit more amounts in Savings and Current Accounts of the commercial banks.

* Effect on GDP

The reduction in the demand will be responsible to make some changes in the GDP formation. Though on the other hand, it is not going to experience huge differences.

* Effect on the Online Money Transaction Method

Online transactions and all the digital transaction systems will be impacted due to the demonetization of Rs. 500 and Rs. 1000 currency notes and that's quite obvious. Right?

Now, come to the main and crucial point. Though we all know that the step has been taken to stand for the Indians, there are some sorts of troubles that we are going to undergo for the next few months. Staying acquainted with them will lead us to have some control over the tough most situation.

As uttered before, households and general mass have to deal with some hurdles because of the sudden announcement made by our PM. These segments are pointed out below:

* The returning and exchanging process is going to be not only time consuming but also burdensome.
* As there is a restriction in the cash withdrawal, general public have to fall under a great trouble.
* People have to face problems while selling and buying goods, getting admitted to the hospitals and so on.
* Those who are on a trip or have planned to do so, will have some kinds of difficulties.

Moreover, an instant deflation would certainly occur but the circulation of money will be reduced. However, our government is there to take a hold over the complete situation. If we delve deep into the matter, the positive impacts are long run. This current situation or bold move has created a great fear among many people, which is to some extent bear both positive and negative aspects. So, it can be mentioned that though a half of the population have to face some instant problems, it is going to be fruitful for the upcoming days.

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