How demonetisation made india a better habitat for formal job creation

How demonetisation made india a better habitat for formal job creation

We need to know first whether India have a job problem or Wages problem because if it is about wages then India needs a higher productivity which comes from structural changes like :- 

  • Formalisation
  • Industrialisation
  • Urbanisation
  • Skilling
  • Deep Financial Markets

But in Four ways Demonetisation made India a better habitat for formal job creation.. Lets see how :-

  •  7.6 crore new monthly digital transactions. Demonetisation exploded the number of digital payments on UPI/Bhim from 1 lakh in October 2016 to 7.7 crore in October 2017. Prohibiting salary payments by cash and 50 lakh new bank accounts for labourers will fuel further adoption; digitisation is important for formalisation because it makes regulatory arbitrage and tax evasion difficult. But the bigger upside of payment digitisation lies in its creation of the information infrastructure for cash-flow based lending.
  • 3 lakh crore new financial savings. The eight months after demonetisation saw mutual fund inflows of Rs 1.69 lakh crore (up 1700%) and the 3 months after demonetisation saw Life Insurance Premiums rising by 46 per cent (details in Mint Street Memo #2). Greater financialization of savings creates a cycle for formal job creation because they deepen and broaden domestic capital markets whose institutions are more likely to fund entrepreneurs who create companies that are small but will grow.
  • 2 per cent lower interest rates. Lowering interest rates is a policy priority and banks had been only passing on 50 per cent of lower policy rates to customers. After demonetisation this has risen to 100 per cent. India’s economic trajectory suggests interest rates could reduce another 3 per cent over time. Sustained formal job creation needs the lower interest rates that come from macroeconomic stability, fiscal discipline, muted inflation expectations and an Independent Monetary Policy Committee.
  • Demonetisation targeted a less-cash society because cash is the primary tool of corruption. .

Conclusion  :- Demonetisation did not end corruption but raised its costs.


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