Cash is King

The government’s demonetization move is likely to affect India’s growth in the short term as the informal sector, supported primarily through cash transactions, would slow down, cautioned a report by Deutsche Bank. India remains one of the most cash-intensive economies in the world, with currency/GDP at 12.2%, higher than Brazil, Mexico and South Africa, it said. The underlying growth momentum in manufacturing, trade, construction and transportation is already weak. These sectors constitute 73% of total informal employment in the economy and the demonetization move may see their growth slow further in the short term.