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Ajay Shah: A monetary economics view of the demonetisation

Money is the lubricant of the economy; a shock to the money supply disrupts the economy and could lead to recession

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Snakes & Ladders

Ajay Shah 

Ajay Shah

Cash is used in India for a large array of transactions in the informal sector and in the formal sector. Denotifying Rs 500/Rs 1,000 notes was a large shock to money supply. This monetary shock is likely to have an adverse impact upon the economy. It is imperative that stable monetary conditions are rapidly restored.

There is a tiny part of India where most activities can be done without cash. The rest of India uses cash for effecting transactions. This includes some activities of the formal sector and it includes all transactions in the informal sector. Financial sector reforms have made ...

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First Published: Sun, November 13 2016. 23:08 IST
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