DETOXIFICATION OF INDIAN ECONOMY WILL COST TOO

Well Modi played his card and now the equity valuation gap with price will narrow down and more realistic price movements will come into play. By scrapping 500 and 1000 notes currency the black money of the business has evaporated suddenly. As an economist I find that Indian economy will find some short term jitters but on a larger scale valuations will come under much clarity.Circulation of black money by converting it through fake invoices and other tax evasion process has finally vaporized.  Finally India finds its income inequality bridged up. The huge gap will now narrow down as the currency is no longer in use and stacked cash in houses are of no use to get them converted into white. Modi have converted profits into real numbers for day to day living. Its being found that detoxification of Indian economy have been executed. Even the black money a routed through Mauritius comes an end as RBI will not convert the currency as the holding of black money is in cash format.

Real estate launches and pre-launches will dry out has hardly a 500 or 1000 currency notes are of any use. Further buyers will stay away from market as they will expect price correction which is bound to happen as  huge black money is no longer in circulation. Bank developers will find soon two ways1) either to cut down prices significantly and get more inventory of ready to move in sold and 2) File for Bankruptcy and get into NPA. Ready to move in properties will find significant growth in sales once prices comes down buy those who are going to get delivered in next  3 to 5 years have gone for a wild toss.

Lets come to another picture where ancillaries industries linked with Real estate like cement, steel and other materials will also feel the heat. One side consumption will come down and on the other hand these companies will also not have any money to run their organization. In simple terms the profits which you show in books are now the real numbers. No more chance of any malpractices currently as the cash component is no longer of any use. This vicious cycle will affect all industries which will get into real picture was the upcoming quarter results and annual numbers comes into play. The income disparity across the society has been suddenly being made into a middle class segment. Indian infrastructure will also face similar hurdles of capital flow as you all know that while construction of an simple road how many politicians and corporate middle men take their cut and how the poor quality of road construction happens. Now all these foul plays have no place and now companies will have to work on real numbers as they cant convert their black money into white through false invoices etc. Real prices of real estate will now be registered in legal documents and stamp papers and no more cash holdings.

The biggest boon is the income inequality which has been reduced significantly as black money was the key factor behind the same. Valuations of living life will be now at par with everyone. Banks NPA will go up and also corporate earnings will be hit as the back money conversion is over. Its  a Master  Stroke by Modi. But their will be pains as some correction will be witnessed in the near future as the money through hawala and other sources come to an end. Even the black money in Swiss bank and also the fund routed through Mauritius comes an  end as RBI will not convert the currency. Further Indian elections and opposition of the current government and state government elections also comes under clear play as bribery segment of this festival is no longer usable as currency notes are 500 and 1000. Money which are stashed in bank locker are also of no use.