‘Demonetisation will have positive implications’

Confederation of Indian Industry (CII) has welcomed demonetisation of the existing Rs. 500 and Rs. 1,000 notes saying this will have positive implications and bring about the much-needed transparency.

According to a press release from the CII, “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 prevalence of cash use had made India prone to high inflation. India’s cash dependence is extremely high with a currency-GDP ratio of nearly 12 per cent compared to four per cent to five per cent in other developing countries.

High level of cash usage tends to slow down the flow of money through the economy.

Lower cash use will have a dampening impact on inflation and this will be a positive for India’s macro fundamentals.

Deposit mobilisation of banks will be strengthened and this will increase the liquidity for banks. “For the industry, this is indeed a historic and welcome move,” the CII said.

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