High value currency recall could cost India whooping Rs 1.28 lakh crore, says CMIE

As per the Centre of Monitoring Indian Economy, the cost of withdrawing high-denomination currency notes to wipe out black money from the country would be a whooping Rs 1.28 lakh crore during the 50-day window till December 30.

As per an exlusive story in Economic Times on Friday which provided insights into the CMIE report, the overall cost could be much higher, the private economy watcher estimated. The demonetisation invalidated 86% of the Rs 17.8 lakh crore of currency that was in circulation on October 28. 

“A steady stream of news reports of empty mandis, low footfalls at malls and drop in business in restaurants, stressed factories paint a grim picture of the effects of a sudden withdrawal of liquidity from markets,” CMIE said in a report on Thursday. 

Emphasising that all estimates are conservative and limited to the 50-day window, CMIE said the government and the Reserve Bank of India are estimated to bear a cost of Rs 16,800 crore, largely on account of printing new currency notes and transporting them to banks, ATMs and post offices. 

CMIE said businesses are expected to pay the biggest price of the demonetisation, which became effective on November 9, and the immediate impact could be about Rs 61,500 crore, or 48% of the total cost of the exercise. 

“We estimate the direct impact on business in terms of the drop in discretionary spending by households. This alone adds up to more than half a trillion rupees during the 50-day period till end of December,” it said. After enterprises, the other big sector to get hit is banks, which, according to CMIE, “lose a lot more.” 

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