Impact of demonetization: Preliminary assessment by RBI insiders

RBI on impact of demonetization

RBI has published a paper* prepared by staffers of MPD on the impact of Demonetization on various sectors of economy. Though not the ‘Official view’ of RBI, the paper gives some insight into the inside thinking.
A small excerpt from the RBI’s conclusion copied below:
“Overall, demonetisation has had some negative macroeconomic impact, which, however, has been transient as remonetisation has moved at an accelerated pace in last twelve weeks.
Demonetisation benefits?
The central bank also tips its hat to what benefits we can expect from the Modi government’s demonetisation move. “In particular, there is expected to be greater formalisation of the economy with increased use of digital payments. The reduced use of cash will also lead to greater intermediation by the formal financial sector of the economy, which should, inter alia, help improve monetary transmission,” the central bank notes.
The RBI warns that because only “partial information is available post-demonetisation, the analysis, especially of growth, is only preliminary in nature”.
M G Warrier
*Source: RBI website


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