Economists see pain, then gain for India after Modi's bank note shock

Mumbai

INDIA'S shock move on Tuesday to take larger bank notes out of circulation will hit Asia's third-largest economy in the short term, but pain will turn to longer-term gains including transparency, higher tax revenues and lower inflation, economists say.

The removal of 500 and 1,000-rupee bank notes to flush out money hidden from the taxman has led to confusion and anger among Indians, who cannot access cash from ATMs and are working out how to preserve the value of what they hold. That, in turn, will hit consumer demand, as well as sectors long suspected to have been fuelled by illicit funds, such as gold and property, where many transactions are cash-based.