The article focuses on the shortage of cash in India and the problems related to it. Several states have implemented withdrawal limits. The workers in India were already seeing a downturn in their earning because of the demonetization and imposition of high level of tax on goods and services. The opposition party leaders have expressed their fear of a forthcoming financial crisis in India. Economists think the reason behind this shortage is unknown and there could be multiple reasons acting together. During demonetization, the black market started collecting ₹2000 notes, as a result , the government stopped the supply of bigger denomination notes. People have started keeping more cash at home due to lack of confidence in banks.
https://www.nytimes.com/2018/04/20/business/india-bank-cash-atm.html
https://www.nytimes.com/2018/04/20/business/india-bank-cash-atm.html
2 comments:
It is intriguing to me that Economists have no idea where this shortage is coming from. The lack of confidence in banks could lead to a potential economic downturn, as observed in other cash shortages in the past decade.
Cash ATM's running out of money could have a drastic impact on the long run, since it could be an indication that the amount of money in the economy has decrease, showing a negative side to the economy. I agree with you on the fact that demonetization has not had a great impact, especially on laborers. It might sound superficial but they need to get their old notes back since a Rs.1000 rupee note is a better medium of exchange than a Rs. 2000 note and a Rs. 2000 is riskier to carry too, thereby leading people to lay off the Rs. 2000 note.
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