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Demonetization of high value Currency will bring “a behavioral change” in Economy and pain due to Cash Crunch will be a non-event by 2018

Pabrai added that Prime Minister Narendra Modi understands he may end up as the net loser after demonetisation and he did it for the good of the nation

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Thousand Rupee Note India. Wikimedia

Mumbai, Dec 31, 2016: Demonetization of high value currency will bring “a behavioural change” in the economy and the pain due to cash crunch will be a non-event by 2018, said Mohnish Pabrai, Managing Partner at Pabrai Investment Funds and Dhandho Holdings.

“Indians will adapt to an economy with scarcity of cash and demonetisation will result in a behavioural change.

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“There will be a segment of the population that will realise that it is better to play within the system,” he said.

This would have huge positive impact in the long run, he said in an interview with BTVi.

“..Demonetisation is short term pain and long term gain. It is a very positive move for India. I think to some extent there are positive unintended consequences.

“I do not think the government fully realised …the degree to which we are going to go digital,” he said.

He said “the pain” due to cash crunch that people are going to feel in Q4 (fourth quarter) and perhaps rolling into early part of 2017 will be “a non-event by 2018 and beyond”.

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Pabrai said investors would be better off by not focusing on macro factors.

Pabrai added that Prime Minister Narendra Modi understands he may end up as the net loser after demonetisation and he did it for the good of the nation.

He also said that there would be a political impact and it might change people’s vote preference and he also felt that the shift to digital transaction enabled small businessmen to better handle finances.

Talking about investments in stock markets, he said low prices of equities were a cause to rejoice because net buyers of equities benefit from lower share prices and buyers should welcome recent changes in world economics.

“Indian blue chips in the long run will do really well,” he said.

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The key is to assess future business of the stock and take advantage of price fluctuations. The patience and analysis of companies is key to investing, he added.

“India has the odds very heavily in its favour to deliver much higher returns than the US markets can deliver,” Pabrai said. (IANS)

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Demonetisation, Aadhaar Spurred Digital Payments Growth: RBI

Pointing to a major area for improvement, the study showed that only three per cent of the population in India used the Internet to pay utility bills in 2017

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long term impact on Real Estate
Demonetisation aided with RERA and GST will put long term impact on Real Estate. Pixabay.

After the demonetisation of Rs 500 and Rs 1000 notes in 2016 pushed digital payments, Aadhaar-enabled electronic know your customer (eKYC) resulted in an exponential growth of such payments in the country, according to a new report by the Reserve Bank of India.

Transactions in which both the payer and the payee use digital modes to send and receive money are referred to as digital or electronic payments.

India recorded an accelerated growth rate of over 50 per cent in the volume of retail electronic payment transactions in the last four years, said the report titled “Benchmarking India’s Payment Systems”.

The growth in 2018-19 was largely due to the steep growth in Unified Payments Interface (UPI), it added.

“In India, the smartphone revolution has seen an explosion in digital payment options, from e-Money to the Unified Payments Interface (UPI) to a combination of the two. After demonetisation, the use of e-Money picked up on a very large scale,” the findings showed.

The digital landscape changed with higher usage of e-Money, UPI, Aadhaar Payments Bridge System (APBS), RuPay, and Bharat Bill Payment System (BBPS), among others.

With 3,459 million e-Money transactions, India was only behind Japan and the US (data on China not available) in 2017 with respect to volume of e-Money transactions, the report said.

The study revealed that over the years, the number of debit and credit cards also increased considerably in India.

Aadhaar Card Reader Logo. Source: Wikimedia

India had 331.60 million and 19.55 million debit and credit cards respectively at the end of 2012. The numbers grew to 861.7 million and 37.49 million respectively at the end of 2017.

By March 31, 2019, the number of debit and credit cards issued were 925 million and 47 million, respectively.

However, the study showed that the cost of digital transactions was a factor inhibiting their growth.

Merchants have to cash out or transfer to their banks accounts at a cost and at times these costs are passed on to the consumer.

“A few countries have tried to regulate costs to ensure that the charges are not usurious, but the jury is still out on whether such a regulation promotes the growth of digital payments. With banks pushing and merchants pulling, it isn’t clear if such caps will discourage the use of cash,” the report added.

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Pointing to a major area for improvement, the study showed that only three per cent of the population in India used the Internet to pay utility bills in 2017.

The report compared the payment ecosystem in India with the systems and usage trends in other major countries such as Australia, Brazil, Canada, China, France, Germany, Britain and the US. (IANS)