Macroeconomic Impact of Demonetisation: A Preliminary Assessment
Published By: Reserve Bank of India, RBI on eSS | Published Date: March, 10 , 2017The analysis in this paper
suggests that demonetisation has impacted various sectors of the economy in varying
degrees; however, in the affected sectors, the adverse impact was transient and felt mainly
in November and December 2016. The impact moderated significantly in January 2017 and
dissipated by and large by mid-February, reflecting the fast pace of remonetisation. The
latest CSO estimates suggest that the impact of demonetisation on GVA growth was modest.
Currency squeeze due to demonetisation along with seasonal factors pushed food inflation
significantly down but has not had much impact on inflation excluding food and fuel. A
surge in deposits led to a sharp expansion in the consolidated balance sheet of scheduled
commercial banks and created large surplus liquidity conditions. These were managed by
the Reserve Bank of India through a mix of conventional and unconventional policy
instruments. There has not been any significant impact on the external sector. There has
been a sharp increase in the number of accounts under the Pradhan Mantri Jan Dhan
Yojana and the deposits in such accounts have also surged. Financial re-intermediation
may have received a boost following demonetisation. An important consequence of
demonetisation has been the sharp increase in the use of digital transactions. [RBI]
Author(s): Reserve Bank of India RBI | Posted on: Mar 21, 2017 | Views() | Download (1810)