Note move to hit parallel economy, terror financing: India Inc

New Delhi: Hailing the government's move to demonetise Rs 500 and Rs 1,000 currency notes, India Inc today said it will have a debilitating impact on the parallel economy and deal a bodyblow to terror financing.

Experts termed the decision as an "unprecedented reform" that will check accumulation of wealth in cash, saying its impact could be bigger than GST, but at the same time added that it is bound to cause hardships in the interim.

Taking the nation by surprise, in a major assault on black money, fake currency and corruption, Prime Minister Narendra Modi yesterday announced the demonetisation of Rs 1,000 and Rs 500 notes with effect from midnight, making these currency papers invalid.

"This will lead to surge in tax collections as paying taxes will be the only way to legitimise the cash of 500 or 1,000 now onwards," said Girish Vanvari, Partner and Head, Tax, KPMG India.

Walmart India President and CEO Krish Iyer termed it as "the most significant and impactful" move to curb the flow of black money and fight corruption.

"This is in the long term interest of the country and will help develop more visible, transparent and formal economy," he said.

CII President Naushad Forbes said the government has taken a measure aimed at the heart of the black cash economy.

"There could be some inconvenience that this change may lead to for the people of our country for a few days. However, we are sure that the government and RBI will take adequate measures to ensure the transition happens smoothly," Ficci President Harshavardhan Neotia said.

PHD Chamber President Mahesh Gupta said the decision to scrap the Rs 500 and Rs 1,000 notes will address the issue of black money, curb financing of cross-border terrorism and equally tackle the issue of fake currency that has acquired a serious and dangerous proportion.

"This a strong step taken by the Modi government and will benefit the growth of digital payments and digital banking in India," said Bipin Preet Singh, CEO of MobiKwik.

Assocham President Sunil Kanoria expressed hope that the disruptions to the trade will settle once the banks are geared up to meet the demand for the currency swap.

Markets went into a free-fall today with the Sensex taking 1,689-point hit in early trade, mirroring global weakness after Donald Trump was elected US President and the withdrawal of high-denomination notes, but late buying by domestic institutions in key stocks helped them recoup most of the lost ground.

The BSE Sensex still ended the day about 339 points lower.

The rupee plummeted 23 paise to 66.85 against the US dollar in early trade on the government's surprise move to ban Rs 500 and Rs 1,000 notes in a bid to curb black money.