Gold sees a sharp rise

In a stunning announcement, the Indian government declared higher denomination notes of Rs. 500 and Rs. 1000 as illegal tender effective midnight, November 8.

This decision was taken to stamp out black money, rampant corruption and stem the circulation of counterfeit currency in the Indian economy.

Let's take a look at how this decision impacts you and the economy at large.

Demonetization announced on November 8 has begun to impact precious metals.

Gold hit a three-year high overnight: from Rs. 30,000, 10 grams gold now hovers near Rs. 32,000.

Analysts believe those hoarding black money will park their money in gold; its demand is expected to hit the roof.

Jewellers believe the market will thrive as people "have more trust in jewellery than currency notes".

People can no longer use Rs. 500 and Rs. 1000 notes for transactions as they're "merely paper" unless exchanged for legal tender at banks.

Given the limited circulation of 100 rupee notes, purchases of groceries, vegetables and other essentials were impacted.

Although exemptions for petrol, railways, toll-plazas has been made, things will improve only when new notes of Rs. 500/2000 are introduced.

The demonetization decision is expected to have far reaching effects on real estate.

Resale transactions in the real estate sector often have a significant cash component as it reduces incidence of capital gains tax.

Black money was responsible for sharp appreciation of properties in metros; real estate prices may now see a sharp drop.

With nearly five state elections in 2017, demonetization has stunned political parties.

Especially, in large states like Punjab and Uttar Pradesh, cash donations are a huge part of "election management".

In one stroke, big parties will find themselves hamstrung as cash hoards are often undeclared money.

Parties will have to completely rejig campaign strategies in light of expected cash crunch.

In September, former RBI governor, Raghuram Rajan introduced 'Unified Payments Interface' (UPI) that facilitates money transfers between people via a smartphone.

UPI has several advantages over existing online-systems and is a move towards a cashless economy.

Yesterday's demonetization will likely result in people adopting virtual wallets such as Paytm, Ola Money etc.: this behavioural change could be a game changer for India.