Indians rush to jewellery stores, petrol pumps after Rs 2,000 note withdrawal

The withdrawal of INR 2,000 currency notes from circulation may actually boost India’s economy temporarily. As per economists, consumers in India might use Rs 2,000 notes tosnap up costly products, such as jewellery and real estate, in order to quickly get rid of them.

Watch:Reserve Bank of India to withdraw ₹2000 notes from circulation

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People might also resort to buying other household items like air conditioners and refrigerators. Ankita Pathak, an economist at DSP Investment Managers, was quoted as saying by Hindustan Times, “It is expected to help growth a bit because consumption is expected to go up.”

Panic buying already visible among customers

Earlier, The Times of India reported that the decision onRs 2,000 currency notes has prompted panic buying among Indian customers. People even complained that store owners were quoting higher prices for gold when paid with Rs 2,000 notes. However, it must be noted that high-value cash transactions will attract the attention of tax authorities as pan card details are mandatorily registered with the sellers.

Also Read |What RBI will do with your out-of-use ₹2000 currency note

Gnansekharan Thiagrajan, director at Commtrendz Research, said, “There is some knee-jerk reaction here. When cash is involved, one of the things you use it for is to buy gold. Definitely, it will push up demand for now and it may make up for the lost demand during Akshay Tritiya when prices reached a peak. It will be a gradual increase in demand as there is time to exchange notes."

People also rushing to petrol pumps

The usage of Rs 2,000 notes for cash purchases of fuel at petrol pumps has significantly increased to nearly 90 per cent of daily sales. This surge occurred as buyers hurried to utilise the withdrawn currency notes.

Prior to the unexpected announcement of the withdrawal of Rs 2,000 notes, cash sales at petrol pumps accounted for only 10 per cent. However, after the announcement, customers began using the withdrawn note for smaller purchases of Rs 100 or Rs 200, anticipating that petrol pumps would provide change.

10.8 per cent of notes removed from circulation

The Reserve Bank of India (RBI) has announced that citizens have until September 30 to deposit or exchange Rs 2,000 notes as part of a "clean note policy." The decision aims to manage the country's currency effectively. RBI Governor Shaktikanta Das reiterated this stance, stating that there has always been reluctance in accepting Rs 2,000 rupee notes, which may have increased further following the notification.

This move will result in approximately 10.8 per cent of the notes being taken out of circulation. It is worth noting that this measure is different from the previous demonetisation exercise, which removed 86 per cent of the currency from the system.

Surge expected in conspicuous spending

Experts also noted that people’s reluctance to disclose their cash holdings may lead to conspicuous spending in the coming days. The decision of banning Rs 2,000 notes is also expected to improve liquidity in the country.

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