The Reserve Bank of India (RBI), in its preliminary assessment report on ‘Macroeconomic Impact of Demonetisation’ has said that the overall, demonetisation has had some negative macroeconomic impact, which however has been transient as remonetisation has moved at an accelerated pace. It said that the demonetisation led to a sharp immediate pick up in digital payments, but the pace of growth moderated somewhat in February 2017. It also said that it is necessary to ensure that digital payments are safe and secure and a need to constantly review and ramp up security features of digital payments to maintain and enhance trust of its users, especially, given the low levels of literacy in India
RBI though said that the report which has been prepared by the staff of Monetary Policy Department (MPD) with contributions from other departments and should not necessarily be interpreted as its official views. Regarding inflation, the RBI warned that the unfavourable base effects may push inflation up in February but the base effects will remain neutral in March 2017. It has also said that the surplus liquidity with banks may decline going forward as the remonetisation process moves further which may also lead to some fall in bank deposits. The report further said the overall business climate should improve with the medium-term positive effects of demonetisation starting to gain traction.
The central bank in its assessment report said that as the impact of the liquidity shock was assessed to largely dissipate by mid-February, growth was estimated to bounce back in 2017-18. With rapid remonetisation, pent up demand was likely to boost consumption demand. After demonetisation, some workers were reported to have received wage payments in advance, but in the form of credit to bank deposits. Since the propensity to consume is high for the working class population, their consumption was expected to increase with the improving access to cash. Accordingly, consumption demand was expected to get a boost in 2017-18 as compared with the second half of 2016-17.