Moody's Investor Services report titled 'Indian Credit - Demonetisation Is Beneficial for Indian Government and Banks; Implementation Challenges Will Disrupt Economic Activity' also states that demonetisation of Rs 500 and Rs 1,000 currency notes will result in temporarily weaker consumption and GDP growth.
“Although the measures in the near term will pressure GDP growth and thereby government revenues, in the longer term they should boost tax revenues and translate into higher government capital expenditure and/or faster fiscal consolidation,” said Marie Diron, associate managing director in Moody's Sovereign Group.
“Corporates will see economic activity decline, with lower sales volumes and cash flows, with those directly exposed to retail sales most affected,” said Laura Acres, managing director in Moody's Corporate Finance Group.
Businesses and households will experience liquidity shortages due to the cap on withdrawal amount. There will also be a loss of wealth for individuals and corporates with unreported income as some will choose not to deposit their funds to avoid disclosing their sources, says the report.
The study also states that greater formalisation of economic and financial activity would ultimately help broaden the tax base and expand usage of the financial system, which would be credit positive. Implementation challenges will affect corporates by lowering sales volumes and cash flows.
“In the medium term, the impact on the corporates will depend on how quickly liquidity returns to the system and transaction flows are restored. The government could prevent the same amount of cash returning into the system, in an effort to increase the use of non-cash transactions and digital payments,” says the report.
The overall operating environment for doing business in India will improve with the ease and speed at which payments reach manufacturers and reduce corruption, but would prolong the economic disruption.
Consumption in India is still largely cash-driven, and a move towards digital payments would require a likely gradual change in consumer habits, according to the Moody's report. (KD)
Fibre2Fashion News Desk – India
| On 24th May 2022
The exports of textiles and apparel from the United States were up by ...
| On 24th May 2022
As the German economy is at the risk of shrinking by 2 per cent this...
China will adopt a slew of strong and targeted measures to stabilise...
Liquidity is a primary issue in Indian context
Ensured payment of fee was least concern for students
Cannot see the world breaking away from cotton & polyester
Hugo De Boon & Koen Meerkerk
Using discarded mangoes that are no longer consumable and usually have...
Established in 2000 as a liaison with the Government of India, Industree...
<div>Confederation of Indian Textile Industry (CITI) being one of the...
Dr. Sean Blamires
Evolution and Ecology Research Centre
Using spider silk for clothing may not seem to be an attractive...
Thomas Ong P S
Malaysian company NanoTextile Sdn Bhd taps into the potentials of...
Pranesh Sridharan & Berndt Koll
The Lenzing Group produces Lenzing Lyocell and Modal cellulosic fibres of...
Label - Dahlia Razzook
London based designer, <b>Dahlia Razook</b> known for her luxury...
Ramya Rao & Kavea R Chavali
<div>The journey of Kalaneca (kala-Art, Neca- Nikaah) formally began in...
Label - Dumebi
Label DUMEBI is a luxury womenswear brand specialising in unconventional...
Letter to Editor
Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.
Subscribe today and get the latest information on Textiles, Fashion, Apparel.