Economists across the globe have brought more bad news for Narendra Modi, the Prime Minister of India, at a time when all political parties in the opposition benches stand unitedly against the Modiâ€™s â€˜war against black moneyâ€™which has brought untold miseries for the mass people of the country. They say, Indiaâ€™s â€˜chaotic moveâ€™ could kill the countryâ€™s economic boom.Growth could be turned to opposite direction for the decision of scrapping of oldRs500 and Rs1,000 rupee notes overnight.
In economic growthin 2015, India outpaces China, the most fastest growing economy of the world. In the year, India’s economy grew at an average rate of 7.5%, while China attained a 6.9% growth.
In India, Rs500 and Rs 1,000 notes accounting for about 86% of cash in circulation. The decision of scraping such a big number of notes will- shave at least 1% or much moreof the countryâ€™s GDP growth, analysts estimate.
â€œA 3% dip in the growth rate [for the current financial year] wouldn’t surprise me,â€ Pronab Sen, India’s former chief statistician, told CNN. Sen is the country director for India at the International Growth Centre in London.
Thomas Rookmaaker of Fitch Ratings feels that the Modiâ€™s move will impact GDP negatively in the short run. How big a hit the economy will suffer â€˜depends to a large extent on how long the cash crunch is going to take.
Economists do not show signs of ending the crisis created by the BJP government anytime soon. The Reserve Bank of India estimated, over 5 trillion rupees ($74 billion) in old cash would have to be sucked out of the economy.
For this, Modi has given people 50 days until 30 December. At the same time, daily and weekly limits is being applied to exchange old notes.
Expressing concern, the Forbes, an American business magazine, also said that the Modiâ€™s move could put down Indianeconomic growth.
The country of 1.25 billion people happens to be a largely cash economy. No other country has taken this kind of step so suddenly, the magazine said.
â€œHouseholds and businesses will experience liquidity shortages, which will result in temporarily weaker consumption,â€ says William Foster, Vice President of the credit rating organization Moody.
â€œFor corporates, decline in economic activity will lower sales volumes and cash flows. Foreign trade could be disrupted temporarily if business operations rely heavily on cash.â€
Forbes thinks, removal of the high-value notes would also be damaging for the booming real estate industry in India.