Moneycontrol Bureau
Even if temporary, markets wore a deserted look today across India as high value cash in hand became just a paper overnight for Indian citizens. Modi's surgical strike on black money has had an impact on traders and parallel economy who used to deal only in cash, especially in India's small towns.
These included cloth merchants, auto parts dealers, sweet shops, salons, wedding venues, jewellery shops etc. Majority of the small business owners who don't keep swipe machines are impacted because of the sudden announcement making Rs 500 and Rs 1000 notes null and void.
Traders are not accepting such cash, while those who had stashed hordes of cash in homes for purposes such as buying a home, wedding or paying a vendor suddenly felt helpless. Most of the cash dealing which was kept out of India's banking system will now be forced to enter it. Hospitality sector will be hurt for a few weeks as cash dealings will go down, making events expensive.
“There could be some inconvenience that this change may lead to for the people of our country for a few days. However, we are sure that government and RBI will take adequate measures to ensure the transition happens smoothly. We appeal to all sections of society to support this initiative and help India’s economy gain strength by addressing the menace of black money and illicit transactions,” said Harshavardhan Neotia, President, FICCI.
“This is an extremely bold move by the Prime Minister and will have a debilitating impact on the parallel economy in the country as well as deal a body blow to terror financing. FICCI completely supports this move," he added.
Marketing overdrive by online startups
Digital companies went on an overdrive sending emailers and SMSes to consumers to shift online even for basic services such as home repairing. Startups such as UrbanClap, GoIbibo, Paytm, Oxigen, Snapdeal, Ola, Amazon, Flipkart, Mobikwik all went on an overdrive to grab new users and downloads.
Payment wallets rejoiced with the move. "The announcement of discontinuation of Rs 500 and Rs 1000 notes is a mind blowing initiative taken by Prime Minister Narendra Modi to curb black money in India,” said Bipin Preet Singh, CEO of MobiKwik, which is offering cashbacks.
"This is the biggest surgical strike on the menace of cash ever heard of anywhere in the world. This is a historic policy change and will do down in democratic India's history as more impactful than the economic reforms of 1990s. Our kids will read about this in their history and economics books. Within a 50 day period, a billion Indians will change their payments behaviour - we will move from cash only to a cash-free economy," he added.
More than 90 percent transactions are still in cash in India, majority due to black money as traders wish to hide real incomes from tax inspectors. It also makes the prices of a product or service cheaper for buyers as often traders don't add the tax component.
"This announcement will bring huge change in consumer behaviour and bring a shift from cash transactions to digital transactions thus bringing India closer to the prime minister’s dream of entirely cashless economy. This will also bring a shift from low volume – high value transactions to high-volume, low – value transactions. More people will start using digital wallets for day to day transactions," says Kumar Abhishek, Founder & CEO of ToneTag.
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