Demonetisation has given the results of more positive responses clubbed with negative economic response. Country is facing cash crunch and less trade. In the economy which is majorly cash dependent, demonetisation has brought the major bent in the economy. Shilan Shah (Capital Economic in Singapore ) said, ” Given the concerns about demonetisation and the slowdown it is likely to generate in sectors that have traditionally been cash dependent, such as consumption goods, the RBI will try to cushion the blow with a rate cut”.
As per their think tankers’ opinions, only thing which can accelerate the economy further is rate cut. On 8th November, 2016, government made announcement regarding discontinuing the higher denomination notes and the historic move has dampened the country’s cash treasure.
Fortunately, the monsoon showers gave a favourable boost to production of food items. So, as per the October data, retail inflation was measured as 4.21 percent in contrary to 4.39 percent in September. Food inflation was at good face of 3.32 percent, moving from the previous month’s zone of 3.96%. The current issue of demonetisation has brought the deflationary flair in the economy. If RBI do not release any clarity on this economic crunch, these numbers can play heavily with the economic health of our country. It has been brought into the consideration that, since, the big decision was prompt and quick, there should be more transparency from the RBI side. Instead, the RBI is acting more in opaque mode which has impacted the image of Reserve Bank of India.
Clearing the air, the Reserve Bank of India is coming forward with the provision of cutting in the interest rates. Now, the ongoing confusion is dominating the minds of economists whether they will cut it on basis of 25 bps (basis points) or 50 bps. The rate cut is important to boost the economic growth as the remonetisation has put a heavy impact on consumption in the economy.
