PM Modi announced demonetisation of existing Rs.500 and Rs.1,000 currency notes last week, while there is no sure measure of the black economy. Different studies and reports have attempted an estimate — starting from the calculations of noted economist O P Chopra to those of D K Rangnekar. The two denominations accounted for 86 per cent of all currency notes. Scrapping and replacing these with new ones would largely take care of all the black money stored in the form of cash. While gross domestic product (GDP) and currency in circulation will be hurt as an immediate consequence, in the long term, most variables will benefit. Retailing will mostly gain but, not surprisingly, real estate and retail jewellery – two sectors that attract a significant amount of black money – will be affected adversely. Demonetisation is expected to result in a 20-25 per cent cut in prices.

(Business Standard)