India risks its position of being the fastest growing economy.
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Most active segments of the population who constitute the ‘base of the pyramid’ use currency to meet their transactions. These sections will lose income due to demonetisation. Cash stringency will compel firms to reduce labour cost and thus reduce income of the working class. When liquidity shortage strikes, consumption is going to be adversely affected. Reduced consumption, income and investment will bring down India’s GDP growth as the liquidity impact itself will last at least three – four months.