With 84 per cent of India's currency notes now out of circulation, traders will face severe hardship in the short run till such time the demand and supply gap in floating cash is bridged, experts said on Wednesday -- a day after the Union government demonetised high value currency notes.
"Since the decision has hit public domain all of a sudden, as a short-term impact of demonetisation, there is certainly a turmoil across markets in the country," Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT) told IANS.
"We also expect a capital liquidity crunch in the markets until the demand and supply gap is met. This will happen once the Rs 2,000 notes are in circulation, and people start exchanging their old Rs 500 and Rs 1,000 notes, or get money credited to their accounts," he said.
On Tuesday evening, Prime Minister Narendra Modi announced that Rs 500 and Rs 1,000 denomination currency notes will cease to be legal tender effective November 8 midnight as part of a string of measures adopted by the government to fight black money.
"The reform measure is aimed at curtailing cash transactions and encouraging the use of debit-credit cards, as well as promoting e-payments," Khandelwal added.
According to Reserve Bank of India (RBI) data, the total value of currency in circulation in the country is Rs 17,54,000 crore. Out of this, Rs 500 notes account for 45 per cent and Rs 1,000 notes account for 39 per cent.
"The wholesellers in the markets are refusing to accept any Rs 500-Rs 1,000 notes today. Small sellers like us are facing problems as there is a shortage of Rs 100 and smaller denomination currency notes," Rajendra Jha, a salesman at Delhi's Sadar Bazar, told IANS.
"There will be some difficulties in our transactions for a month or two. We hope the government comes up with a solution soon," he added.
Reactions in the local markets were mixed. Most of the vendors were unaware of the development and willingly accepted the old Rs 500 notes in exchange for vegetables.
However, the vendors who were aware of the reform, refused to take the higher denomination notes.
"Our suppliers have refused to accept Rs 500 notes. I have bought my stock on credit," Naresh, a local vegetables seller, told IANS.
Khandelwal, however, maintained that the situation will improve slowly and the liquidity in the markets will become vibrant.
"It will be a long drawn process since India is a vast country with its own limitations, and no one was prepared for the sudden reform," he added.
--IANS
ppg/ag/pgh/dg
Disclaimer: No Business Standard Journalist was involved in creation of this content
