Early morning I woke up to two major changes and a bunch of memes floating around. One – a little MODIfication of our economy. The other – an election result of a progressive super power, While both the changes are bound to impact us, let us talk about the one closer to home.
We took some professional help from the top chartered accountants registered with www.altumcore.com to understand what demonetization of Rs. 500 and Rs.1000 means to us – the common man. What are its implications on us? And what is potentially the next move?
Here is what you need to know:
What is this about?
The directive is – The notes issued by RBI till November 8, 2016 will now lose their legal tender character.
“Which simply means, these cannot be used for transacting business and/or storage of value for future usage. These bank notes can be exchanged for value at any of the 19 offices of the Reserve Bank of India or at any of the bank branches or at any head post office or sub-post office.”
What are the repercussions?
Speculations are rife about the impact of this move by Modi. Some call it an admirable move, some call it a nuisance and there are even some who are clueless. Some repercussions can be as follows:
- Individuals – The impact on them is negligible. All you need to do is get your 1000 and 500 rupee notes exchanged. So your cash in hand will become money in your bank account in case the sum > Rs. 4000. Any amount < Rs. 4000 will be given back to you in cash in accepted (legal) bank notes.
- Salaried professionals needn’t worry too much as they do not have much black money. They also get paid via net banking and the transactions are accounted for.
- Small business owners needn’t worry as most of their transactions are recorded and made online.
- Farmers or rural areas without access to banks or internet facilities might suffer a bit in the short term, until a proper infrastructure is setup.
- Fall in real estate prices as this will cause a decrease in the purchasing power of people. Hence, a decrease in demand and an over abundance of supply will cause the lowering of prices.
- Increase in prices of precious metals (as people will tend to get rid of black money by investing in them)
What can you do?
What we can do to come up from this situation is
- Educate as many as possible.
- Support the move. As we can finally gain an understanding of the amount of money/wealth present in India currently. This will lead to a conversion of money to online mediums and help in improved tracking.
- Help out those in the lower economic segment by educating them and not getting rid of your notes with their ignorance.
- If the cash (Rs. 4000) is not enough for your needs, start paying more through net banking, online, mobile wallets. This is a good time to start going digital!
- If you do not have a bank account, its time you open one. Bank accounts (depending on their kind) give you interest on your balance as well.
- Once the ATMs are functional, you can withdraw cash from ATMs up to a maximum of Rs 2,000 per card per day till November 18. The limit will be raised to Rs 4000 per day per card from November 19. Otherwise, you can always withdraw cash against a cheque.