As former prime minister Manmohan Singh yesterday during the Rajya Sabha debate had voiced concern that the Centre’s decision to ban high-value notes of Rs 500 and Rs 1,00 could affect GDP growth by at least two percent has found support from several economists that that the economy need to brace up to avoid any slowdown at least in short term.
However, another section of economists believe that the country’s economy might see a boost in the long run as higher deposits could help raise tax revenues and thus, help the government to incur more capital expenditure, a ‘The Indian Express’ report has said.
Yesterday, Moody Investors Service had expressed concern on far-reaching impact of demonetisation. It said that demonetisation will “significantly disrupt economic activity” and will result in weak consumption and GDP growth in the near future. The report further said that the corporate will see dip in economic activity, with lower sales volumes and cash flows and those directly exposed to retail sales will have most of the impact.
It also said that several businesses houses as alse households will face liquidity shortages as cash is taken out of the system along with a loss of wealth for individuals and corporates with unreported income, as some may choose not to deposit funds back into the formal financial system to avoid disclosing the source of funds. It added that the greater formalisation of financial activity would uhelp increase the tax base.