2,000 withdrawal will have positive impact on GDP: report

Mumbai: The decision to withdraw Rs. 2,000 currency notes in India can have a positive impact on the country's gross domestic product (GDP) growth in the fiscal year 2023-2024 (FY24).

Economists at the State Bank of India (SBI) anticipate that the real GDP growth for the first quarter of FY24 will be 8.1 percent, exceeding the Reserve Bank of India's (RBI) estimate of 6.5 percent.

The SBI economists believe that the withdrawal of Rs. 2,000 notes will contribute to this higher growth rate. They estimate that the withdrawal will lead to a boost in consumption of approximately Rs. 55,000 crore (550 billion rupees). The withdrawn notes are expected to result in Rs. 3.08 trillion (3.08 trillion rupees) returning to the banking system as deposits, of which Rs. 92,000 crore (920 billion rupees) will be in savings accounts. The economists anticipate that 60 percent of these savings will be withdrawn, leading to an immediate increase in consumption.

In the long run, the report suggests that the consumption multiplier effect could result in a boost of approximately Rs. 1.83 trillion (1.83 trillion rupees). The withdrawal of Rs. 2,000 notes is expected to have an immediate positive impact on consumption demand, thereby stimulating economic growth.

It's important to note that this information is based on a report by SBI economists, and the actual impact of the withdrawal of Rs. 2,000 notes on India's GDP growth will depend on various factors and may differ from these projections.