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Demonetisation impact on neighboring economies

Neighborhood

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Nepal – The majority of affected

Transacts daily with India in INR for its required supplies, and shortage of new currency features caused deficit of essential items and influenced Indo-Nepal operate

Also requires INR to get international exchange to additional currencies, but they have banned most financial orders in Of india rupees and termed fresh notes because “unauthorised and illegal”

Not enough reliable info ->Nepal Govt. is uncertain of the volume of INR currency their citizens maintain (esp. in informal networks) and to exchange them would be an ardent task in a nutshell term (As per Nepali Rashtra Traditional bank ~ INR 35 mn in 500 and multitude of rupee records are present inside its formal financial network)

Reliability concerns ->RBI reluctant to freely offer currency because of possibility of their very own unscrupulous use (terrorism – used by ISI, black funds generation)

Bhutan – Not much affected

Bhutanese currency is definitely pegged with Indian foreign currency at 1: 1, and Indian money is officially tradable in Bhutan, and Bhutanese Central Bank presents currency in least trouble without much hoarding (also better synergy with RBI, Government. ), continue to short term scarcity would occur

Decrease in volume of religious travelers to India to visit Bodh Gaya and monasteries, also also loss of revenue via tourism to Bhutan Government. due to much less inflow of Indian travelers

Difficulties for Bangladesh. Sri Lanka and Myanmar

. Allows usage of rupee like a parallel currency because of their rely upon India’s monetary robustness and policy stableness, but this move provides rattled all of them

Would influence small and minor traders (border haats) over the borders one of the most who generally deals in INR Cash

Bangladeshis, SL visiting India for medical purposes happen to be facing key problems to prepare INR money, and are stuck with high denomination older remarks

But , might hit the extremists badly esp. in Myanmar as the currency they have hoarded has become just a piece of paper

Pakistan Strike to their Na-pak iraade

Reduced smuggling of goods/weapons and terrorist activity in Kashmir region owing to nonavailability of new forex to fund their particular heinous causes and also built the fake-note printing press maintained by simply ISI useless

A limited currency understanding owing to weeding out of dark-colored money, false money out of formal system at some level would further more increase the cost of imported products from India. Also it will lead a push toward gold in these economies (safe-haven)

In short term, demonetization would certainly affect the broader economy of nieghbourhood nations to some extent, as well as the move is likewise seen as resistant to the principles of ‘Neighbourhood First’ policy. As well, Govt. during these nations might now will be cautious concerning freely trading in INR, and instead may push to be used of their own foreign currencies

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