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Collateral damage of Demonetisation: Demand for oil plunges to a 13 year low; GDP also hit
PM Modi's move of demonetisation for cracking down on black money has caused a lot of collateral damage. The repercussions of the severe cash crunch are still being felt, although over three months have passed since the announcement of scrapping of old higher denomination 1,000 and 500 rupee notes on November 8.

While many people are of the opinion that there is no more shortage of cash at ATMs or banks, the truth was recently exposed after banks were closed for three consecutive days in certain states like Haryana, Himachal Pradesh and Punjab owing to Ravidas Jayanti (a restricted holiday) falling on Friday, Saturday being a holiday for second Saturday and Sunday being the universal off day for banks pan-India.

Almost all ATMs I happened to visit on Saturday and Sunday near my house in Gurgaon were out of cash, as many people had withdrawn cash on Thursday evening itself, due to their past experiences of currency dearth. So, regardless of repeated reassurances, the situation on the ground is still dismal in our country where most consumer payments are still made in cash.

">According to a report issued by the Oil Ministry's Petroleum Planning and Analysis Cell on Friday, fuel consumption in the country fell by 4.5 per cent to 15.5 million tons in January from 16.2 million tons a year ago. The demand for oil in India has dropped the most since May 2003.

The report also says that the demand for diesel, which accounts for almost 40 per cent of the total fuel demand in India, dropped by 7.8 per cent to 5.8 million tonnes, the biggest decline recorded since September. The demand for petrol has also declined the most since June.

Moreover, according to an Economic Survey presented by Finance Minister Arun Jaitley's advisers, the growth in the Gross Domestic Product (GDP) might slow down to 6.5 per cent in the year through March, which was 7.9 per cent last year.

Tushar Tarun Bansal, director at Ivy Global Energy says, "This decline is due to demonetisation. I would expect this decline to be a one off and dissipate from February. This should result in a slower demand growth for diesel in the first quarter in 2017."

For the first time in more than a year, the consumption of petroleum coke also registered a drop, declining by around 9.9 per cent to 1.95 million tons. The consumption of petrol dropped by 0.6 percent to end up at 1.8 million tons.

However, the demand for Liquefied Petroleum Gas (LPG) rose by 16.4 per cent to finish at 2 million tons, while jet fuel consumption increased 17.8 per cent to 6,27,000 tons. 

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