Well, the nation came to a standstill after Prime Minister Narendra Modi played his masterstroke by announcing the demonetization of Rs.500 and Rs.1000 currency notes from the midnight of 8th November,2016. This decision has been taken in order to curb the flow of black money in the country. But, the big question is how the banning of Rs.500 and Rs.1000 will affect a common man? How this masterstroke is going to create a big difference in common man's life. Lets' find out more in this article.
How This Decision Impacts Common Man?
People who have a lot of cash, legally earned, will deposit it in the bank . Thus, this thing in return will increase the deposit of the bank by a huge margin.
In fact, this thing also increases the lending activity because banks have a CRR (Cash Reserve Ration) to maintain so that with more deposit they can lend more money to people.
Moreover, the credit loans will be easier and interest rates may come down. However, more loans given out will actually increase vast supply of money, hence create inflation. But, it will take time to happen, its not gonna happen overnight.
Well, what will happen overnight is nothing but a heavy deflation because people having illegal money may be scared to deposit it in a bank.
You will have to stand in the long queues and wait for your turn to exchange or deposit your old currency notes with new ones.
There is a limit when it comes to withdrawal of money from banks and post office.
Impact on the Economy
This decision to cease the existing Rs.500 and Rs.1000 currency notes is surely a setback for all black money hoarders, but it will also badly impacts small-time retailers who trade in cash. Moreover, this thing ultimately means all small scale jewellers, grocery shop owners as well as small vendors will find it hard to sell their products with no hard cash available in the market.
Whereas, on the other hand, showrooms that accept money through credit cards are likely to register a spike in the sales because people have no other option than using their credit cards to make the payment.
Another, major impact will be on real estate market, which generally runs on cash deals from people who prefer to stash their money via property.
(Updated on:9 November,2016)