Effects of Rs. 500 & 1000 Ban on Common Man, Businesses, Services & More
I believe by now, every Indian must be knowing that Rs. 500 and 1000 currency notes would no longer be accepted as a valid currency in India. i.e they have been banned completely with immediate effect from the midnight of 08Nov2016. This was the boldest decision ever in the history of India.
Since we all are aware of the decision, let’s understand the effects on various industries/businesses, common man & other sections of the society. Note that the impact of this decision will be for a very short time. And as things smooth and new notes get into circulation, businesses will be back as usual.
Any person/business accepting cash currencies will directly suffer especially poor. In fact those who use their service i.e. common man will suffer the most for few days due to non-availability of lower denominations. However this won’t last longer as banks would be offering extended working hours in addition to working on Saturday and Sunday to ease common man’s pain. Remember this action will make India regain the crown of “Sone ki Chidiya” very soon.
Check out the positive impact on Indian economy due to currency ban.
Grocery/vegetable shops: Almost every local grocery vendor in India accepts cash currencies. So naturally they won’t be accepting these two currency notes. And this has been noticed right from day 1. No one is ready to accept the currencies except Rs. 100 and lower denominations. So anyone buying grocery will have to either buy them on credit or give small denominations.
Transportation: We all use some form of transportation everyday mainly – autorickshaw, taxi, buses, cycle rickshaw. All these business will be hit for a day or two especially those who commute longer distances and payment amount is above Rs. 500. So either commuter has to provide smaller denominations or else do not travel or look for some other alternative. Because no one will accept these two most used currency notes.
Truck transport: Almost every business is someway or the other dependent on transportation especially trucks. All drivers and middleman have preferred only cash. No credit card/online transfer etc. They will be impacted badly unless and until they are paid in lower denominations.
Read more on plastic currency note of Rs. 10 denomination to be printed in India.
Travelers in India: The decision must have been severely impacted foreigners who might have done foreign exchange and converted their local currency into Indian rupee before coming to India or after landing. Since their exchange amount is high typically above Rs. 10000, they might have been directly given Rs. 500 notes for sure which won’t be accepted anywhere. This applies to NRIs as well who have returned to India yesterday and have done forex.
Daily wage workers: Almost every industry has to deal with daily wage workers every day who are paid on a per day basis. So these workers earnings will be impacted as contractor or whoever pays them may not have lower denominations available with them. Either workers will have to accept these notes or get paid in lower currencies or get paid at a later date.
Have you participated in the currency ban survey. Do it now, 90% people say this move was BRILLIANT. Read more about the survey.
Hotels/Restaurants: These businesses will also suffer especially those who accept only cash currencies. No lower currencies means no visit to hotel by the customers.
Stock market: Anyone buying/selling physical shares typically pays via cash. In normal scenarios, trading amount is always bigger in quantity and there is no alternative other than paying through lower denominations.
Check out details on currency ban.
Fruits and vegetables vendors or other doing similar businesses: They all accept only cash, provided you are not buying from shopping mall and other places where multiple payment modes are accepted.
Medical shops: Medicines are lifelines for the patients. Non-availability of lower denominations or non-acceptance of Rs. 500 & 1000 currency notes will result in either medicines bought on credit/lower denominations or not bought at all due to the ban. Not everyone has Rs. 100 and Rs. 50 or lower currency notes in sufficient quantity.
Hospitals: This certainly apart from medical shops will be badly impacted. Patients who are already hospitalized or are under process of getting hospitalized must have done some form of arrangements for money before 08 Nov 2016. They would be badly suffer.
Real estate: This market will be the most badly impacted obviously due to black and white money which have been functional since years. Buyer normally pays certain % of money (black money) in cash to the builder/agents and remaining portion is paid via loan. So any deal of the house which was supposed to happen on 09 Nov, 2016 or even after this date will suffer. Because the black money or brokerage paid to agents involve large sum and all paid in cash. So buyer will either have to re-decide on buying the house or home builder or agent will have to accept these banned notes at their own risk. Or buyer will have to arrange lower denominations and then pay.
Remote places: India’s remotest places still have no access to banking and it’s various services. For e.g. northeast regions. People from such regions will suffer. To ensure smooth functioning, SBI has announced cash being airlifted from Calcutta to NE regions so that there is no shortage of Rs. 100 notes. Two helpline numbers have been activated for the people from these regions viz. 0361-2237596/ 2237979.
Latest update on currency ban: Government of India has announced Pradhan Mantri Garib Kalyan Deposit Scheme on 17th December. Black money holders are given last chance to declare their undisclosed income before 31st March 2017.
Entertainment industry: Anyone used to buying movie tickets at the counter won’t be able to buy tickets if they do not have lower denominations especially multiplexes where ticket prices are high.
Share your opinion on demonetisation. 90% people say this move was BRILLIANT. Read more about the survey.
Ecommerce industry: Although eCommerce is growing at phenomenal rate in India, mode of payments used by Indians is largely cash on delivery. Because of this decision, their sales will slow down. So this will directly impact businesses of mobile phone companies, clothings, and jewelry especially as they contribute to bigger chunk of online ecommerce market places.
Insurance industry: Online transactions for buying insurance is on rise but still higher number of policies are sold offline. Since normal policy premiums are higher in amount, policies won’t be sold offline by most of the companies. So those who are not ready to buy online will buy either at a later date or purchase using lower denominations.
There are numerous businesses such as travel agents, ticket booking agents & many others will take a hit.
Get to know the summary of latest happenings across India after the currency demonetization.
Despite of the effect which surely won’t last for more than a day or two once new notes are ready for circulation and banks start from tomorrow and ATM becomes functional with larger denominations available through them. But remember that restrictions have been placed on daily and weekly withdrawal limit.
Check out benefits of demonetization on Indian economy.
Warning by the government released on 09 Nov, 2016: Anyone depositing cash over Rs. 2.5 Lakhs threshold between 10 Nov, 2016 till 31 Dec, 2016 could attract tax plus 200% penalty if there is a income mismatch and eventually a case of tax evasion. Every account held by an individual will be checked against the cash deposited. Amount below 2 Lakhs is anyways below taxable income and no action would be taken by income tax department on such individuals.