Demonetization and Donald Trump: The Two Ds Twisting the Indian Economy

There is a huge rumble in the Indian economy. And the country’s financial sector is never going to be the same. As demonetization hits hard at home, President-elect Donald Trump’s sweeping victory in the US elections is setting up the stage for more radical changes. It’s yet to be seen how this amalgamation will shape India’s future. Nonetheless, immediate effects on the stock exchange and realty sector are clearly visible.

BSE Sensex dropped 1,300 hundred, points following demonetization. A lot of ventures contributed to its elevation but the crunch in liquidity yo-yoed the market. Finance experts have predicted a drop in the Indian GDP during the October-December quarter. The ban on Rs 500 and Rs 1,000 denominations might also appreciate the Rupee value in Forex markets.  

Demonetization, Donald Trump, Indian Economy

Trump’s win is pushing international markets to be volatile. USA’s 10-year bond yield has gone above 2% after eight months. A rate hike of 80% is impending in the market due to the current scenario. His policies against China will benefit Indian markets in the long run. On the other hand, his views on immigration and outsourcing will limit the Indian IT industry. Silicon Valley will bear the repercussions of the lack of skilled Indian techies. 

Gold, real estate, IT industry, and the debt market are the most affected by these two events. Trump’s triumph and demonetization have a mixed effect on gold. Gold prices in India are reportedly falling. You can thank the people who started investing heavily in gold to convert their Rs 500 and Rs 1,000 notes into a safe-haven asset. Even in the USA, gold price has significantly dropped.          

The Indian realty sector was unaffected by the American elections, but the demonetization drive has punished it vehemently. Prices of plots, properties, and flats are steeply falling as the black money often used in the deals is being eliminated. To sum it up, demonetization and Trump are prompting mixed consequences. The big picture will emerge only after Donald Trump implicates his policies and transition in the Indian economy is complete.  

Suggested reads: GST helps India climbs second spot on Global Optimism Index  

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