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People in India get one last day to turn in their bills, so what’s next?

India's program to remove 500 and 1,000 rupee bank notes (around $7.36 and $14.72) from the financial system has entered its final day on Friday, but it wasn't clear when the subcontinent's economy would get back to normal.

The program, dubbed demonetization, was aimed at removing around 86 percent of India's hard currency from circulation, leading to huge lines at banks around the country as consumers tried to deposit their notes.

Supporters had hailed the move, which was initially pegged as an important step in the fight against counterfeit notes as well as the so-called black money that has plagued the economy for years. But the unexpected step also spurred hardship as much of the country's economy is cash-based, especially in poorer areas.

The government planned to replace the defunct notes with new 500 and 2,000 rupee notes, but media reports indicated the distribution of the new bills to banks was slow.

While the program may have largely succeeded in getting India's people to take their bank notes out of their mattresses and put them in a bank account, spending the money has become a sticky wicket for returning the economy to normal.

Bank withdrawals remained limited, with account holders only able to remove around 24,000 rupees a week (around $353), or around 2,500 rupees a day from cash machines.

"The money has been deposited in the banks. For people to use it, they need to make withdrawals," noted Radhika Rao, an India economist at DBS Bank. "Those limits on withdrawals need to be lifted. That part has been extremely slow. It's not allowing people to spend."

Other analysts have noted that the demonetization would likely have a chilling impact on consumer spending, at least in the short term.

Nomura said in a mid-December note that it expected the demand-supply mismatch of currency notes would affect the cash-dependent wholesale trade channel, which accounted for as much as 80 percent of consumer sales. The wholesale channel for fast-moving consumer goods was largely dependent on cash transaction, it noted.

Nomura forecast that the consumer companies it covered would see no significant growth for the second half of the 2017 fiscal year.

"Business for November has been hit for all the consumer companies under our coverage," it said, adding it didn't expect a complete recovery until the end of the fiscal third quarter, with revenues likely to fall around 5-7 percent in that quarter for most consumer staples companies.

While in the short term, demonetization will likely sideswipe economic growth and corporate earnings, analysts generally believe the program will be a positive longer term as it puts the kibosh on some black market activity.

But DBS' Rao noted that demonetization might have less impact on the black market than was initially expected, with much more of the soon-to-be defunct notes coming back to banks than the government had expected.

"In fact, most of the money that has been scrapped is back in deposits so that tells you there's not much black money out there or the players have found ingenious measures to get the money back in," she said.

That could mean less wealth destruction for the economy, something that would have dented consumers' discretionary shopping.

People stand in a long queue to dispense currency at a working ATM, on December 10, 2016 in New Delhi, India.
Mohd Zakir | Hindustan Times | Getty Images
People stand in a long queue to dispense currency at a working ATM, on December 10, 2016 in New Delhi, India.

Rao noted, however, that tax authorities would assess the newly deposited funds and that there were efforts to examine other assets where black money could be hiding, such as real estate transactions and tax-haven countries.

Overall, she expected the subcontinent's economy would take a substantial hit in the near term, especially as the implementation of the new nation-wide goods and services tax (GST) neared, although she doubted it would take effect by the initially planned April start date.

She forecast that in the quarter ended Dec. 31, gross domestic product (GDP) would grow less than 6 percent on-year. For the full year, she expected the combination of the demonetization and GST could keep growth at around a "6 percent handle," compared with the 7.5-8 percent previously expected.

—Neelabh Chaturvedi, Saheli Roy Choudhury and Spriha Srivastava contributed to this article.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

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