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Low consumer demand and expected moderation in money supply owing to demonetisation is likely to exert downward pressure on inflation, says a report by Dun & Bradstreet.
According to the report, following the demonetisation move, there has been a decline in consumer demand and moderation in money supply, which in turn is expected to exert downward pressure on inflation.
D&B expects the CPI inflation to be in the range of 3.9-4.1 per cent and WPI inflation to be in the range of 3- 3.2 per cent during November this year, respectively.
"The dent in consumer demand, especially in the rural segment and expected moderation in money supply owing to demonetisation is likely to exert downward pressure on inflation," Dun & Bradstreet India Lead Economist Arun Singh said.
"Even if this measure does not eliminate the cash flow of black money, it would certainly raise the costs and risks of such activities significantly in future," Singh said.
He further noted that improved tax collection, increase in savings, transparency in the system and proliferation of a cashless economy are the big positives for the economy going ahead.
"However, the mid to long term multiplier effect through credit and investment channels can materialise only if the banks and the government decides to spend the money judiciously," he said adding that government spending is anticipated to increase strongly to pull in the private investment."
Prime Minister Narendra Modi had announced the demonetisation of Rs 1,000 and Rs 500 notes on November 8, making these notes invalid.
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