Demonetisation: Defunding or Smart Business

Demonetisation: Defunding or Smart Business

According to quora.com demonetisation is the “act of banning/taking back of currency unit of its status as legal tender.  It is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit.” As of November 8, 2016, India has demonetized their formerly legal tender of INR 500 and INR 1000 notes to new INR 500 and INR 2000 notes. This decision was made to end the dissemination of black money as well as counterfeit currency which had posed a serious problem for the government. As with any transition of this magnitude, concerns among the business world arose regarding the impact this change would have on small business, corporations and start-ups. Although no one will question whether the reasoning behind the demonetisation is a sound one, everyone can understand the concerns regarding the outcome of the bottom line for businesses, large and small alike.

Start Ups

Although this change is new and has caused understandable confusion for the public, it is a sound advice to hold on tight and let the situation settle itself. The benefits for small start-ups will outweigh the inconvenience in the long run. For example, the implementation of this will create a new way to transfer money between bank accounts, and can make banking quicker and easier by providing instant transfer of funds which is always beneficial where start-ups are concerned. It will also provide new avenues of payment methods. So, toughing it out now to enjoy the long-term benefits of the demonetisation, the key is to keep a cool head and stay the course.

Small Business

Small business will be impacted perhaps a bit harder in the beginning until the situation balances out naturally. Once again it’s a matter of holding on tight for the ride ahead. Online companies will see an increase in business since it is expected that people will turn to online purchases which is a great news for them. Now businesses that are relying on cash transactions may see total demand collapse not to mention that the jewellry industry and the second hand car industry are both expected to experience loss in capital which may be devastating.

Corporations

Once again the impact of corporations will be felt in the first phase of the changeover. Big business is expected to see a minimal decrease in currency, but is expected to be able to rebound rather quickly. With the demonetization, there will be new ways of payments (mostly electronic) that will better streamline India’s economy as well as the bottom line for corporations. This is expected to improve the way business is conducted and once fully implemented will be much easier and financially stable than before.

Demonetization’s main intent is to create a more viable economy while attempting to remove black money as well as counterfeit currency that has been a problem for the Indian Government. It will require the entire nation’s patience and a trust on the governance, but will pay off in the long run.

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