Industry foresees stronger economy

The decision by the government to demonetise high denomination notes is likely to have a far-reaching impact, striking a blow at the heart of the illegal economy, according to the Confederation of Indian Industry (CII).

This is an economic master stroke by the Prime Minister and must be allowed time to play out, a press note quoting Chandrajit Banerjee, Director General, CII, said. “After a short period of some pain when the economy adjusts to the sudden withdrawal of cash, the CII expects a much stronger economy. the transition to a greater usage of fintech for payments will trigger a rise in spending, leading to higher economic growth,” he said.

Mr. Banerjee said lower cash use would have a dampening impact on inflation and this would be a further positive for India’s macro fundamentals, he observed.

Pointing out that the Reserve Bank of India would now have more room to cut interest rates as inflation comes down, Mr. Banerjee said demonetisation would have a positive impact on banks as deposit mobilisation goes up, resulting in increased liquidity.

“This is also a great opportunity to transition to a “plastic economy,” where there is a prevalence of debit and credit cards for transactions” the press note said.

The CII said the demonetisation would curb illegal activities like corruption, racketeering, human trafficking and gambling.

“For industry, this is a welcome move with very positive implications.

It will strike at the heart of the parallel economy, which provides unfair competition to organised industry,” the pres release t added.

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