11 ms·

> What happened in reality was a lot of capital intensive businesses suffered as an immediate aftermath. Can you please explain a bit, please? Isn't traceable

• JumpCrisscross 7y ago
  > Isn't traceable capital (cheques, bank transfers, credit cards) as worth as liquid capital? Theoretically, yes. In a country with unreliable power and wireless Internet infrastructure, no. More critically, there are switching costs with digitising an economy. Dropping those out of the blue on the whole country simultaneously will knock out businesses. Speaking as an outsider, demonetisation and the erosion of the RBI’s independence have been huge red flags for investing in rupees or in India. (Case in point: non-deliverable rupee trading in London recently surpassed spot trading in India.) That makes it harder for businesses to access international capital markets.
• sifar 7y ago
  I think the OP may be talking about MSME industries which employ and subcontract to people who rely on cash. The other point is you may have traceable capital, the other party may deal in cash out of necessity. Think maids, laborers, companies employing them, small time traders/contractors, transport. Sucking out cash disabled a whole bunch of them. Underneath, the formal economy is supported by the informal (read cash transactions) economy most of whom don't earn enough to be taxed. This was the doublespeak they got away with.