Of the Crackdown on Black Money....

The Centre's crackdown on black money is driving the usage of cash in the economy . According to a report by Ambit Capital, the Narendra Modi government's crackdown is making it difficult for money to be laundered through real estate and gold. “ A marketed increase in preference for holding cash in its physical form has materialised owing to Modi's crackdown on black money . Also, as expected, there has been a notable decline in usage of formal banking channels as evinced by the decline in bank deposits as well as debit cards,“ the report said. Bank deposits growth had dropped to a 53-year low of less than 10% in FY16. Also, despite a surge in the number of debit cards issued during FY16 (under the Prime Minister's Jan-Dhan Yojana), the growth rate in value of debit card transactions fell to 29% in FY16 from 39% a year earlier.
The RBI's RTGS (real-time gross settlement)--an electronic platform for high value fund transfers--saw its growth rate more than halve from 15% to 7% in value terms. According to Ambit, the crackdown has lowered the appetite for real estate and gold and shifted preference to holding cash in physical form.
Ambit estimates India's size of black economy to be around $460 billion, which is around 20% of its GDP of $2.3 trillion. At this level, the size of the black economy is larger than the stated GDP of emerging markets like Thailand or Argentina. The report quotes papers published by the government, which highlight that much of the black money is locked up in physical assets like real estate and gold.
Measures aimed at curbing black money after 2014 include making the PAN card mandatory for purchase of goods above Rs 2 lakh. Besides, cooperative banks, post offices, Nidhi companies and NBFCs need to insist on PAN for transactions over Rs 50,000.

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