Affects of Demonetization.

·        Hello there !!

·        After going through the expert's opinion on the current Demonetization I could gather the following for  a brief read. 

·        · Economic experts say Commodity transactions and general cash market transactions are likely to feel an immediate impact. Unorganised sector, including small trade market activities, will remain volatile in the short-term.The largest impact of the government’s move will be in the unorganised sector, which isn’t represented in the markets.

·        ·       All experts agree that Real Estate will be one of the most affected sectors .This industry is known to entertain cash transactions of large magnitude. More loans given out increases the  broad money supply and creates inflation. With less potential buyers in the market and fewer people having white money, the demand for the land goes down and drives down its price.Experts said the primary market will not be impacted but resale market will feel the pinch. 

·        ·       Other experts and leading personnel in the field is of the opinion that it may cause some pain in the short-term, but the long-term outlook for the industry looks positive.  Along with real estate regulatory law, GST and Real Estate Investment Trusts would further improve transparency and increase investor confidence in the real estate market. 

·        ·       Some experts state that it will not have any impact on the primary residential segment as the buyers in this sector are driven by mortgage. The impact will be felt in the secondary market and the unorganised developers community where there are  cash dealing. Overall there could be downward pressure on prices, which will boost demand.  

·        ·       Some jewellery experts  felt that the Indian jewellery market will be the worst hit with the ban on Rs500 and Rs1000 currency notes.  About 70-75 per cent of jewellers in the country are unorganised. But 25 per cent of the organised jewellers are contributing more than 80 per cent business. India is the world's largest gold consumer and imports a sizeable chunk of its total annual consumption of around 900-1,000 tonnes

·        ·       Banking experts state that since banks are the back bone of this entire process they are  also the biggest beneficiaries. Post complete exchange of currencies, banks should benefit from higher deposits and transaction volumes, lower cash handling costs and greater acceptance of digital channels. There are likely to be secondary benefits for the insurance, asset/wealth management companies through higher financial savings. The Nifty closed 1.31% down, Bank Nifty closed higher by 0.09% giving a confirmation of the same. 

·        ·   Some experts say the entertainment, restaurants sector could be affected . One of the most common areas, where undisclosed income is utilised, is the entertainment and restaurant industry. There are plenty of restaurants that accept Credit and Debit Cards, however the road side dhabas and other unorganised sector will be affected, since a majority of the transactions are in cash form in here .People may not opt for entertainment and eating out in the short term in the same scale they did earlier. 

·        ·       Other sites are of the opinion that beauty parlours could be affected since this  booming industry  works largely on cash. In the past few years, beauty parlours have mushroomed on almost every street of urban and semi-urban India. Although  larger, organised parlours  accept credit and debit card payments, most parlours transact mainly in cash because it is often seen as a luxury spending fuelled by unaccounted income. 

·        ·        Some experts say tourism could be hit as  favourite foreign tourist destinations of Indian people like Thailand, Singapore, Malaysia, Maldives, Hawaii, Vietnam, Sri Lanka, Nepal, China, Indonesia and Dubai will see a negative impact in tourism revenues as all black money sponsored trips will come to a halt. Indian Local Tourism will also get affected as they lose large chunks of the pay-in-cash-only clientele. Illegal foreign currency conversion is also reported to be badly hit because they were big acceptors of Rs500 and Rs1000 denomination currency.  

·        ·        Experts state that Luxury items will have a drastic negative impact. The Majority of the people spend their undeclared income on such products. It is likely that all luxury segments like clothing, electronics, luxury car, furnishing and allied business will take a hit. Media and hospitality industries are also likely to get affected.

·        ·       Some sites say that , sectors that  will have a low impact are the – Pharma, FMCG, Education, Agriculture, Hospitals, Energy and Telecommunication.

·        ·       There is a Whats app joke going the rounds: When PM Modi says  “My dear country men,  in a national address, all of us gets goose bumps and the shivers.  What will he do next ?