note demonetisation

Demonetisation: Short-term pain might outweigh uncertain long-term gains, says Fitch Ratings

The currency ban was a ‘one-off event’, and those who operate in the shadow economy will still be able to use the new notes, the agency said.

The short-term pain might outweigh the uncertain long-term gains of demonetisation, even though the intentions behind the move were in keeping with broader reform efforts, Fitch Ratings said on Tuesday. The Centre’s decision to scrap Rs 500 and Rs 1,000 notes has caused “short-term disruption in India’s economy”, it said in a newsletter titled “Benefits of Demonetisation Are Highly Uncertain”. They added that this had led them to downgrade the country’s growth forecasts for 2017.

In November 2016, Fitch Ratings had revised its forecast for India’s gross domestic product growth to 6.9% from 7.4% for the financial year ending March 2017.

“The withdrawal of bank notes has left consumers without cash needed...and farmers without funds to buy seeds and fertilisers,” the agency said . “Supply chains have been disrupted, and time spent queueing in banks has meant lost hours of productive work. The impact on the economy will increase the longer the disruption continues.”

While noting that the currency ban had some “potential benefits”, Fitch Ratings warned that demonetisation was a “one-off event” and that its positive effects were unlikely to “last long enough to make a significant difference”. The move may succeed in pushing economic activity from the “informal to the formal sector”, but those operating in the shadow economy will “still be able to use the new high-denomination bills and other options (like gold) to store their wealth”, the ratings agency said.

The statement from Fitch Ratings contradicts Prime Minister Narendra Modi’s mantra of “short-term pain for long-term gains”, which he adopted since his government’s decision came under fire from various quarters. Modi, along with several ministers of his government and the Reserve Bank of India, had maintained that banks and ATMs had enough money, even though citizens had been grappling with a cash crunch.

We welcome your comments at letters@scroll.in.
Sponsored Content  BY 

Five memes that explain why you need a toothpaste for your payday

That payday smile won’t shine itself.

At the end of the month, every salaried professional experiences a wide range of feelings. First, there’s extreme possessiveness - after spending several days trying to live off whatever little is left from paying bills and all those shopping binges, you’re understandably cranky and unwilling to part with the cash you have.

Giphy
Giphy

Then the week of payday arrives and you can finally breathe a sigh of relief again. As the glorious day comes closer, you can’t contain your excitement.

Giphy
Giphy

And then payday dawns and the world gets to behold an interesting phenomenon - your payday-wala smile. It is instantly recognizable as something different and special - it stretches across your face, from ear to ear and is mirrored on the faces of your colleagues. Soon the excitement wears off and you are at complete peace. You have worked hard, you’ve earned your keep, you are in Zen mode.

Giphy
Giphy

But is there a way to make payday even happier? And make your payday smile last even longer? You may be astonished to learn there is. A way that will make you so much happier – your smile will gradually consume most of your face and need extra grooming. In fact, you might have to consider getting a special toothpaste, the Happier Toothpaste to care for the smile you have on that happier payday.

So how can you get more salary in-hand on your payday? Simple – invest in Equity Linked Savings Schemes or ELSS. These are open-ended equity Mutual Funds, with a 3 year lock-in period, that not only help you save tax but also have potential for wealth creation.

Giphy
Giphy

The icing on the cake is that the dividends from these funds are also tax free. So ELSS means more salary in-hand for you today, more potential growth for you tomorrow! To know more about ELSS and to get your own Happier Toothpaste, click here.

Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors:Axis Bank Ltd. is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

This article was produced by the Scroll marketing team on behalf of Axis Mutual Fund and not by the Scroll editorial team.