News: Update On Predictions On Demonetisation Made On 9th Nov 2016 AM-23.01.2017

Effect of Demonestisation – What Was Predicted On Morning Of 9th Nov 2016 & What Has Been Seen Upto Now

One has to be clear as to what is happening wrt the withdrawl of 500 & 1000 denomination notes. These are being phased out, and new 500 & 2000 will be phased in. It is not that these are being withdrawn and not being replaced! So it will have a lot of effects in different areas, and short term & long term effects will be there.
1.    Existing holders of large stash of unaccounted cash will be hit hardest as they will end up losing a large amount of it were they to deposit it in bank - Upto 50% hit taken
2.    RE transactions where there was a large component of cash will get affected for some time till fresh cash generation takes place- Mixed reaction in different places, and now new currency finding its way into it
3.    Political parties building up huge cash reserves for the polls will be hit hard as well - As predicted
4.    Politicians of the yesteryears who have got massive cash holdings will be hit hard as well. The financially smart politicians who have routed their money to other legitimate channels in a clandestine manner already will be laughing now - Upto 50% hit taken
5.    Bank loans will increase - Not yet, banks haven’t had the time from cash change/deposit
6.    Terrorist funding will be hard hit for some time to come, Kashmir may actually see some peace and quiet as a result thereof for some time - To some extent, but new cash is again there

Short Term effects
1.    Temporary panic might be there till rationality sets in and the longer term implications understood that only existing cash holders are being hard hit, but regeneration will continue and be even more easier with higher denomination notes available - As predicted
2.    Immediate effect will be that a lot of cash will get deposited in the banks, increasing the revenues for the government and at the same time getting more deposits into the banking system - As predicted
3.    RE Transactions where cash was going to be involved will be temporarily stopped - Mixed reactions. A lot of cash has come into the RE sector
4.    RE transactions where buyers were going to purchase with zero cash involvement will defer for some time anticipating a fall - As predicted, buyers confused
5.    The RE sellers which were till now insisting on cash in the transactions will start accepting full cheque payments, and there might actually be an increase in sales as result of this - As predicted
6.    Some RE sellers will defer selling till regeneration of cash takes place in a few months to maintain or increase profit margins - As predicted, lot of apartments now on rent instead of sale
7.    The differential between primary and secondary RE sales will reduce drastically for some time, and this might even give an impetus for the builders to increase prices in all cheque deals, since the supply in the secondary market might get reduced. This is only in those places where there was a substantial cash component, since in other places impact will not be so great. - As predicted
8.    Buyer who can pay in cheque will benefit greatly - Some have taken benefit of the confusion, and got desired apartments/houses in full cheque which they couldn’t earlier
9.    Land prices might decrease a bit temporarily, if full cheque payments are going to be made. Developers are not really buying big parcels of land anyways at present, and focused on developing their existing land banks, so there the pricing will not affect a lot. - As predicted
10.    The cash reserves accumulated by the political parties will find a way back to the people quickly, since political parties will be unable to utilize it to the same extent and people can still deposit the same in their bank accounts - As predicted
11.    There might be temporary shortages of goods in the shops - Mixed reaction
12.    With the drastic inflow of cash back into the banking system, there will be positive implications for the measured economy as such - As predicted
13.    Banking sector will benefit the most from this, there will be substantial credit offtake in the near future - Not yet, as most were busy with cash change/deposit drama 
14.    Currency might end up stronger with so much money coming back into the regular system - No drastic fall despite huge outflows
15.     Some people are going to make huge amounts of money due to the changing currency - As predicted

Long term effects
1.    Once new currency notes are in circulation, the corruption cycle will set in again - Already started
2.    The corrupt people will try to make up for the losses, and there will be more corruption going ahead, albeit in a more sophisticated manner - Mixed reaction, apparently bribes in instalments/credit and other novel methods
3.    The holding time for cash will reduce and people will invest or buy things more quickly rather than accumulate cash over a longer period of time. This will boost the measured economy  - People are hoarding cash as of now, will have to wait and watch 
4.    The RE sector will see the same situation returning, or perhaps even more corruption, since a lot of the people will try to make up the losses by increasing the profit margins - Wait and watch, new currency already being used to purchase property
5.    Prices will rise more in the times to come as builders will need to pay more for the same approvals, and also will need to get all approvals in place before starting to sell a project - Still few months away as RERA & GST to kick in
6.    People will be able to avail a loan more easily but cash component will creep in again and increase massively over a period of time – Should start in 1Q 17
7.    Banks will continue to have increase in their revenues as a result thereof - 2Q 17 onwards
8.    The discounts available on cash purchase of a lot of things might increase as the sellers will try and circumvent rules and regulations to make profit with the new GST regime setting in - Still few months away
9.    The common man will be hit harder later as some things will become more expensive as a result thereof - Still to see how it pans out. Already hit due to other factors though
10.    The political parties/leaders in power at present and having the ability to generate more cash income will gain massively from this at the expense of the older political parties/leaders which on account of not being in power will not have the ability to do the same - Already evident
11.    There will be a massive change in the political scenario as a result of this, and in all probability the parties/leaders who are going to be in power for another 2-3 years are going to be the biggest beneficiaries - Not too sure anymore after the debacle