Thursday, November 10, 2016

A drastic step towards a modern Indian economy !

A drastic step towards a modern Indian economy ! 
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A weapon of mass destruction got unleashed on the economic system of India and its consequences are going to be deadly in the short term.  The black economy in India was dealt a severe blow, and anything that is directly or indirectly dependent on  black money will be affected. Real estate sector specifically will undergo massive and prolonged correction - empty lands, apartments, commercial complexes etc are going to be worth a lot less than what they were currently perceived to be. High spending weddings, big parties, luxury big ticket purchases, any extravagant spending will take a big hit. Over the last 2 decades or so money has lost its  value and inflation sky rocketed, unproductive spending has risen to alarming levels. Real estate sector has become the poster child for this  and has become a pseudo currency. The repricing of assets will go on for a number of years until they reach some balance with the regular economy.

Rampant speculation in this sector raised the prices to unsustainable levels. NRI remittances is one of the contributing factors adding fuel to this raging bubble, the higher the prices go, the more exciting and speculative it gets, quite natural in any asset bubble. This was primarily driven by the black money ,and consequently the high denomination currency facilitated it. People with modest lives and without any black money were left out for some time as they couldn't afford the rising prices fueled by the black money. Price behavior of so many things that are generally considered essential and non luxurious have defied gravity far too long, and is now the time to start falling back to earth.

Shadow economy is very unhealthy for the country, large amounts of undisclosed wealth causes so many distortions and problems for the average citizens. The cleanup has just started and will transform the Indian economy into a modern, transparent and  global economic power.

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