Some money may now flow into gold, realty and high-value white goods

The withdrawal of ₹2,000 notes would not significantly impact consumption patterns, but certain high-ticket items, like gold, and high-value white goods, may experience a shot in the arm temporarily, economists told ET. Given the comfortable timelines of exchange and clear messaging from the government, the macro impact would be ephemeral and marginal, they further highlighted.

"The ₹2,000 notes are not with the common man for transaction purposes, they are sitting as idle cash. A large part of that could go into high-ticket items – gold, real estate and high-value white goods," said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank.

Bhardwaj noted that the withdrawal is unlikely to change patterns of spending in the long run.
"Discretionary spending especially in urban India on some durables and services could see a spurt, in a bid to utilise the stock of ₹2,000 notes. Gold, small appliances, home furnishing, mobile phones, membership services of salons, gyms could receive a shot in the arm," said Yuvika Singhal, economist, QuantEco Research.

Singhal did caution that construction activity could slow down, but an "outsized impact" on any of the sectors was unlikely.

Anil Gupta, senior vice-president, co group head, financial sector ratings, ICRA, believes that there may be long-term benefits of the move. "Over a longer term, the sectors with large-ticket cash-based transactions could see more transparency as it could become difficult to deal in large volumes of cash in smaller denominations, which will be overall beneficial for the economy by way of higher tax collections and better compliances," he pointed. But Gupta highlighted that the decision could adversely impact the sectors relying heavily on the cash transactions like real estate markets.

"A slowdown in the real-estate market could have a second order impact on other sectors linked to the real estate sector, however this impact is going to be transitory," he added. Madan Sabnavis, chief economist, Bank of Baroda also noted that there may be a temporary disruption for cash-incentive activities like elections, real-estate, social functions like marriages, but overall the move is not expected to have any impact on the economy.Elections to 5 states are scheduled for the end of 2023. There could be some adverse impact on small businesses, which hold high-denomination notes for managing daily transactions, according to Nomura's India Economist, Aurodeep Nandi.

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