Friday, 11 November 2016

Impacts on Business Shield after Government Banned 500 and 1000 Notes.

A view by Mr. Deepak Gupta.

40 Minutes Speech!! Who knew it would bring a heavy storm for 2 days. There is a historical reform in the economy of India by prohibiting 500 and 1000 notes effect from Tuesday Midnight. The process of pretension seems to be a bold problem for everyone now. Every single person is in the supporting side to the decision of Modi Government. Entrepreneurs, commoners and majority of industry have shown their overwhelming support knowing that this would cause a huge problem for them to survive the attack.
Public talks are now on top picks asking and giving opinions that this could have informed two three days before. In fact, this would have beat the entire purpose and all black money could have been circulated very well. A truth fact is that this is going to impact the business man, commoners and can bring huge inflation or deflation in financial institutions.
Unfavourable impacts on following factors
Rural Economy
This reform in the economy of India can have a bad impact on the rural economy. Out of 10 lakh banks from all over India, there are 6.8 lakh villages which have no bank in their area. Some of them do not have slight knowledge of banking and about the recent classification of India economy. Time may come that rural areas will be having cashless transactions in their areas. Also, peoples who have 500 or 1000 notes without a valid identification or document will face so many problems while exchanging the money.
Black Money Holder
Government declaration on India economy by the demonetization of 500 and 1000 notes has specifically pointed to the black money holders to burst out their lies. So, once they get caught through tax verification process then they may have to pay the double or 120% or 60% of the total illegal amount stored. With this move in play, black money holders are now left with two options with them. One is that they must declare the amount as their income or they circulate it through hospitals or other places where the government has given certain time to exchange the notes. They have only the first choice to deposit the money in the bank which in further will notify the government about their undisclosed money from the previous and is higher than the income rate. Even if they show it as normal income then also they have to pay the tax as per the normal rate.
Fake Note Route
A convinced source of media report says that Modi said in his talk about how terrorist get their money. Enemies of the Nation across the border running their operations using fake currency notes for years. Recent act by militant operating against India has exchanged 500 Notes with $7.50 at current exchange rates. So, Modi's surgical strikes on these groups have a mindset to withdraw these series of high-value notes and introducing new notes.
Domestic/ House Hold Areas
Now this process has an outlook that the move will break the flow of high-value notes from the black money market. However, Broder view says that the impact points towards the super-rich, black marketers and smugglers or hawala operators as they only keep high denomination notes. Business of every single person has gone down to the earth in two days. Every one of them has 500/1000 notes which they are now standing in a long queue to deposit them.
Foreign accounts and Tax havens: Those who have their black money stored in the swiss banks, offshore accounts, gold or properties in foreign parks are not going to affect by this move of the government. Here a question arises that, how the government is going to stop this?
Political Party Funds
Politicians and their parties have lots of black money in their pockets and they use them during election time. It is going to be very difficult for them to pass trucks of money for their illegal use.
Favourable Impacts of this move
There are so many fields which have favourable impacts on them after this move. Following are some noticed fields
1.    Banks are expected a valid proof on every penny: The government has announced that every single person needs to bring an official identification to deposit the amount. Especially for them who has lots of cash to deposit in the bank. In exchange note, the bank will give only Rs.4000 as an immediate amount to the account holder and others will be credited to their account. This will increase bank's deposits on a huge scale. In fact, it will increase the lending activities
2.    Jewellery business welcomes this change of Indian economy. Gold price will rise so the trust on the importance of gold will also rise rather than high-value notes. Small variation will be there in this business but overall it is going to be beneficial for it.
3.    Despite all of this, positive impacts are there in rural sector which cannot be neglected. Rural transactions take place through currency notes and undocumented lending and borrowings which take the rich landlord to the nearest bank in the city.
4.    Deflation in the economy could be widely impacted by this and this will be witnessed in next six months.
5.    Positive Impacts on payment transactions and security will drive the card payment across the INDIA and cash transaction will be very less. ATM’s are restricted with withdrawals of 2000 amount per day and banks are limited to 10,000 per day & 20,000 a week.
There are some other practical problems are there with people like vendors, vegetable stock owners, local grocers and other consumer stock owners. But this will be temporary suffer which can bring huge changes in the future.

Sharing some tips to avoid mistakes through this period:
1.    The government has announced the time up until 30th December to deposit your cash and get exchange notes. Also, those who are not able to deposit them within this time will be able to do so up until 31st March, 2017 as per the extended announcements.
2.    Bank will keep every track of your money and the income tax department too. So, make sure you deposit them by submitting proper documents.
3.    Wait for some time and then go for deposit. Do not let your hard income money go on waste just because you were in a hurry and did mistakes.

No comments:

Post a Comment