MUMBAI: The decision to withdraw Rs 2,000 note is expected to boost consumption and fuel economic growth, said a report. According to a recent report by the State Bank of India, the country’s GDP (gross domestic product) growth may exceed 6.5% in the current financial year.
The demonetisation will also boost bank deposits, repayment of loans and usage of central bank digital currency, added the repot. The Reserve Bank of India (RBI) has estimated GDP growth to be 6.5%for 2023-24.
“We expect Q1FY24 GDP growth at 8.1% with an upward bias due to the impact of Rs 2000 note withdrawal event...this reinforces our projection that FY24 GDP could be higher than 6.5 per cent, basis the RBI estimate,’’ the note said.
Banks have started accepting Rs 2,000 notes for deposits and exchanges from May 23 after the RBI announced the withdrawal of these notes. As per the RBI, over half of the currency notes in the denomination have returned back, with 85% of it coming as deposits into banks, while the remaining 15% have been exchanged at bank counters.
Based on this experience, the SBI note said the consumption can get a Rs 55,000 crore boost because of the move.“One of the major benefits of withdrawal of Rs 2000 note might be the immediate uptick in consumption demand. As per our estimate consumption demand may be frontloaded by Rs 55,000 crore,” said the report.
“Nearly Rs 55,000 crore could be withdrawn by the public from about Rs 92,000 crore saving bank deposits to be made cumulatively through Rs 2000 notes. This should give consumption boost along with increasing the velocity of money,” it added.
It estimated Rs 3.08 lakh crore to come back as deposits into the system, of which Rs 92,000 crore will come into saving banks accounts, of which 60 per cent will get withdrawn, thus giving an immediate increase in consumption at Rs 55,000 crore. In the long run, the boost can be Rs 1.83 lakh crore because of the consumption multiplier.