SMB Sector And The Ban On 1000 And 500 Rupees Notes

What are the estimated amounts of Black money that would be recovered or curbed with this automatic reaction? Some experts say the ban to be a gimmick. Some others question about the introduction of the 2000 rupees note. Economic and the social value addition towards the introduction of the 2000 rupees notes must be revealed to the common person. If there are real benefits expected out of the move, the figures must be made public. Real estate shares are stumbling badly to about 20% in each trading.

Deflation triggered


Demand supply balance determines the market price in the real estate sector. This industrial sector has no standard mark of pricing like what you see in case of Gold pricing. Obviously, this market will see a sharp decline, and then there will be gradual recovery, over a period. Black money was mostly speculated in the land purchases so far. There have been no big purchases made in this industrial sector, for so many reasons. Big business firms and the many other structured and organized players in the industry are using bank channel. Yet, how about those small and medium sector industry where the cash-to-cash transactions are inevitable, conventionally since so many years now? This is one something that needs a resolve at this crucial juncture.

Working class of the society is affected badly. Imagine the plight of the drivers, the house cleaners, and the cooks or the electricians as well as the plumbers. They do provide services that are confined to the informal sector, where the payments are mad fortnightly. These are cash payments too. How do they get their money exchanged and when to meet their immediate commitments, could be a matter of concern.

Tumbled real estate sector

Small business owners, who are getting cash from the clients as payments in the rural parts of the country, where only cash transactions are only in place, even all until now, gets affected seriously. Almost any household of the mediocre social status and the upper class in the rural areas would have a lot of cash money in hand to be readily available for distribution to meet various needs, locally. Right from the salary distribution to the workers, payment for fuels of the logistics, payment for the service providers, and many other needs, will want ready cash. They do have cash in reserves to be distributed into all these channels on a daily basis, to keep their operations active. There are thousands of villages, towns and town panchayats all over the country, where you can see such communities to thrive and sustain in the same format.

All these people are sure to be affected severely, knowing what to do in the next few days to not to be able to get money in these denominations, or to offer money in these denominations. To exchange all the money in hand before the stipulated period, will also be difficult as there are slabs for exchange amount. Surely, because of this, their business operations will be affected. The next level of last grade laborers, who are relying on these people for money, will be affected worse in turn. They are not going to get their wages in hundreds rupees notes of fifty rupees notes readily right away as the owners are not having it enough in hand as reserves anymore.

They have to struggle for a quite few more weeks ahead, to lead their routine life with sufficient cash flow in hand. They can even be left to starve. Last level laborers who rely on the daily wages, from the small business owners, will be affected worse, as there will not be too much loose cash left out in the kitty of these owners to be distributed to the laborers.

SME and the 2 days transition phase

Prices of gold will decline sharply with the deflation that is created with the ban of 1000 rupees notes, and the 500 rupees notes, all of sudden. It is possible to get only 4000 rupees exchanged in the banks, even for at least next ten days to come. Imagine the number of people that are to stand in queue. Imagine the amount of time, and efforts that we ought to spend to get this small change done in the banks from day after tomorrow.

When the plight of the common person could be made miserable for the next few days with no big cash flow, permitted, deflation is the natural. With the limitations imposed at this juncture, those who have stacked 500 rupees notes and 1000 rupees notes in the homes and country side villas, privately, have to either come up with explanation to exchange their notes, paying taxes or waste the money. When the currency flow is cut down dramatically, and the supply is just the same, naturally, value for money increases. If you are getting a widget for a dollar earlier, you may get a couple for a dollar. Yeah, that is the rule. It is the case for rupees.

Quarterly profits retarded

That is what the common person needs too. Yet, from the SMB sector perspective; this is not a healthy move, for they are sure to struggle bad at least for quite some more days to come. The situation can be like putting these sector owners particularly in shackles without being able to do their transactions freely. The amount of money that revolves around as cash in the small and medium sector business operations is quite a large. It is the case with the rural small business owners too.

Cash to cash transactions will be severely affected and there arises a sense of urgency to clear all the notes that in reserve by hook or crook. Unfortunately, there is no one to take it except the banks and a few other institutions. With that said, it is a tough ask to get their money redeemed for its fullest value in this time. Some might run into losses too. Else, considerable amount of time has to be spent on exchanging the money from the banks from next week onwards, which again is only to affect their businesses bad.