The global credit rating agency, Fitch in its latest report has said that benefits of demonetisation are highly uncertain and the potential positives are unlikely to be strong or last long enough to make a significant difference to government finances or medium-term growth prospects. Due to temporary disruptions to economy post demonetisation, it also revised down the GDP growth forecast for the current fiscal to 6.9 per cent from earlier 7.4 per cent.
Describing demonetisation as a one-off event, Fitch said that people who operate in the informal sector will still be able to use the new high-denomination bills and other options like gold to store their wealth. It further notified that the informal sector could soon go back to business as usual in the absence of new incentives to avoid cash transactions.
According to Fitch, demonetisation could boost government revenues to the extent that it aids the shift of economic activity to the formal sector from the informal sector as more earnings get declared. Further agency added that it is possible that this positive effect would soon outweigh the drag on revenue collection from lower short-term economic activity.