currency control measures but stressed taking care to minimize disruptions in the economy . IMF spokes person Gerry Rice said , “ of course , given the large role of cash in everyday transactions in India ' s economy , the currency transition will have to be managed prudently to minimize disruptions . He was asked by reporters to comment on the Indian governments ' decision to withdraw `500 and `1000 currency notes from circulation . He said “ I am just saying that when countries make these kinds of move , which is not exceptional – countries do this quite often – the transition needs to be managed very well .
HSBC CHIEF ADMIRES INDIA
Demonetisation is a bold and positive measure that can tackle issues like corruption and black money in India . Stuart Milne , Chief Executive at HSBC India admired India ' s step of not banning . It is a very bold move and in the long-term , it is a very positive move for India to make . Of course there are challenges of execution . RBI and all the banks are working very hard to overcome . However , there may be same negative impact on growth which would be somewhere in the region of 0.5 – 1 %. India has tremendous advantage towards going cashless . The UPI technology is happening now bypassing debit cards and credit cards which are now redundant technology . UPI technology is as much as a game changer as ATMs were 25 years ago .
MOODY ' S WARNS INDIA ON GROWTH SLOWDOWN
Rating agency Moody ' s says that the demonetization is beneficial for the Indian government but this unprecedented move will disrupt economic activity and impact GDP growth negatively for a few quarters . The move implications for every sector of the economy as the decline in economic activity will depress corporate sales cash flows . Marie Diran , associate managing director in Moody ' s Sovereign Group said , “ 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 .” Any fiscal improvement will be credit positive for India ' s barely investment grade ‘ Baa3 ’ rating . Moody ' s expect implementation difficulty to disrupt economic activity with sectors having a more direct exposure to retail sales like telecom and auto , or with large exposure to sales in rural areas such as farm equipment manufacturers being impacted the most . Households and businesses will face liquidity shortages and there will be a loss of wealth for individuals and companies with unreported income , and some will choose not to deposit funds into formal financial system to avoid disclosing the sources of such funds . The negative wealth effect will likely reduce the level of demand for traditional stores of value of unreported income including real estate , gold and jewellery . The consumption knock will result in temporarily weaker GDP growth following a material impact for a few months . Moody ' s says demonetization demonstrates the Indian government ' s commitment to addressing tax avoidance and corruption , which if effective will lift tax revenue collections . Demonetisation , together with other revenueenhancing policy measures , such as the implementation of the Goods and Services Tax ( GST ) will ultimately contribute to raising the revenue intensity of economic activity . Enhanced tax collection would widen the fiscal
4
Economic Challenger // ISSN 0975-1351 / Jan . -March . 2017