We all know India has a huge and thriving parallel economy. Perversely, this parallel economy, run entirely on cash, has produced results in terms of employment, consumer demand, rural credit, informal “banking,” and money-flow. How will demonetization hit/hurt this sector? This is also being projected as a Robin Hood kind of measure—taking it from the rich and giving it to the poor. That is the political message going out. Is this a pro-poor measure?
No. basically, it’s not a parallel economy. Black economy and white economy are largely intertwined in India. So when you sell your real estate property you generate black and white income simultaneously. When you produce sugar, you don’t show 10 percent and show 90 percent of the output. That’s why when the black economy is affected the white economy is also affected. This move, which is supposed to impact the black economy, is affecting the white economy terribly. Demand is going down.