Chapter 1

INTRODUCTION

“Demonetization is the act of stripping a currency unit of its status as legal tender.’’
The idea of demonetization was bought by prime minister of India Narendra
Damodardas Modi to stop black money circulation. The old unit of currency must
be demolished with the new ones. Its an effective way of curbing black money. On
November 2016 the government took the great initiative to crack down on black
money in the country.Fiji,Singapore and Philippines were the country after India
who have opted for demonetization. The reserve bank of India has withdrawn the
old Rs 500 and Rs1000 notes. People who had this higher value of notes were given
an extended period till January 2017.It was an important decision taken by the pm
of India against bureaucrats,politicians,business class
people,terrorists,smugglers,drug dealers or the black marketing people who were
engaged in unlawful activities which would lead an harmful impact on
environment as these notes would no longer be legal tender from midnight,8 th
Nov 2016.

In India demonetization was required to track fake currency, tax avoidance,etc.So

the curbing of black money can lead to positive impact in the countries economy.
Its an process of removing black money completely. Its a step against parallel
economy, so we need to corporate with prime minister along with the government
of India for this great decision taken by them. It will create a better future for the
coming youths. Due to demonetization, India would turn cashless and everyone
will start doing easy transactions,i.e credit card .

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So the elimination of black money can lead to positive impact in many ways.
The progress would lead to drastic change in all other factors. In India we can
see that each and every citizen is above poverty line. More of black money can
lead to change in country’s economy.

Demonetization will help the Income Tax Department as money will be caught so
the terror funding activities couldn’t occur. Terrorism is a threat to our country, if
black money is completely thrown out then there would be a reduction in the crime
rate. Therefore our country will be in the safe hands and condition of living will be
improved. Tax revenues are increased which is an benefit of demonetization.
People had to face a lot of problems as it was a quick step taken without any
preparations.IT Department were able to find black money at a larger scale.

Demonetization helps in catching illegal forms of money through various means. In

India, due to demonetization there would be a lot of changes soon everyone will go
cashless through online transactions,i.Debit card. Demonetisation helps to control
inflation. It helps to promote cashless economy.

However the older denominations were allowed to get converted into euros for
some period of time. It will help in smooth transition. In 2015,Zimbabwe also
took this crucial step of demonetization to overcome the problem of hyper
inflation. According to RBI reports on 31st march 2016,denominations of Rs 500
and Rs 1000 notes were consisting around 86% of the total cash and was having
an approximate value of Rs 15.44 lakh crore. Demonetisation was an important
step taken by the Pm to tackle problems such as terrorism, corruption and all
means of illegal money. It will also help to remove fraudulent money.

This move proved very helpful in cleansing the formal economy of the country and

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discarding black money. Many previous attempts made have resulted into good and
few recorded adverse effect on the country’s economy. In the present Indian
economic conditions, the long term impacts are left to be registered. The short term
effect has brought a negative result in the country’s economy. Luxury commodities
were in shortage of prices which was bullish hit in the economy.Pm modi is also
organising various campaigns like “jan dhan bhojana’’.These organizations work
towards digital India. All transactions should be performed through cashless
means.

In India ,there were many situations when higher denominations notes were
curbed.RBI printed the highest value notes of rupees 10000 in the year 1938.After
that government demonetized rupees 1000 and higher value notes in the year
1946.Higher value notes of rupees (rs1000,rs 5000,rs 10000) reintroduced in 1954
and all of them were demonetized to remove the black money of illegal
tender.Rupees 2000 notes were first time introduced in the year 2016.Firstly
denominations of rupees 500 was introduced in the year 1987 in order to control
over the increasing value of notes.

Alongwith India many of the countries took this crucial step of demonetization
in the history.Almost the countries who have done demonetization had some
common objectives which would help to eradicate various problems such as
black marketing, Terrorism and corruption and hence their country’s
government also decided to take this important step to get relief from these
problems.

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 REASONS BEHIND DEMONETIZATION

 To tackle black money in the economy.

 To lower the cash circulation in the country which “is directly related to
corruption in our country.

 To eliminate fake denominations and dodgy funds which are being used by
terror groups to raise terrorism in India.

 To fight Black money, corruption, terrorism and counterfeit currency with one
single decision.

Definations

“Demonetization is a drastic innovation into the economy that involves

removing the legal tender status of a currency”.

“Demonetization can cause chaos or a serious downturn in an economy if it

goes wrong.’’

“Demonetization is a weapon used to stabilize a currency and fight inflation, to

facilitate trade and access to markets, and to push informal economic activity
into more transparency and away from black and grey markets”
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Demonetization is an act of discarding the legal tender status of a currency unit
in circulation. Anticipating positive changes on the liquidity structure as a
whole nations often adopt demonetization policy as a whole to maintain the
balance of current economic system of the country. It will help to control
hyperinflation and gives economy a boost in respective fields.

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 WHY DEMONETIZATION BECAME
MASTERSTROKE
BY PM MODI

 Boost deposit base and savings

 Improve monetary transmission and reduce lending rates

 The demonetization drive of higher denominated notes should give a

push to cash deposits in Jan Dhan accounts

 Benefits from higher income tax collections

 Rise in GDP growth potential

 Support government finance

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 Chapter-2

NEGATIVE EFFECTS

 Cash

shortage

Stock

 market

cash

 Dumping of

agricultural produce

Drop in industrial

output

 Queues outside the bank

 People faced difficulties in marriage occasions and other

 Many of the people do not have their bank accounts in rural areas.

POSITIVE IMPACTS

 Demonetization has a very positive impact of millions of human traffickers.

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 Other sectors like drug trafficking,illegal dealing of money,funding of
election and involvement of various terrorist groups effected badly.

 Steps towards cashless economy

 Real estate can see significant course of correction

 Less chance of avoiding taxes

 Parallel economy

Some positive effect of demonetization on the economy are

as follows:-

1. Break Down of Black Money:-Black money accumulation affects a

country’s economy in a negative way. It helps in shutting down the trading of
goods or services which are runned through illegal means and thus destroying
the savings and having a positive impact on its economy.

2. Real Estate:-Real Estate is one of the industry that runs largely on black
money. Demonetization stops the flow of black money in the real estate sector
to ensure a fair system.

3. Increase in Bank Deposits:-The circulation of the old currency notes are

banned and those who are having these denomination notes should get their

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 money deposited in the banks so that there is no wastage.Hence,cash
amounting of millions of rupees get deposited in the banks.

4. Cutting Monetary Support for Terrorist Activities:-Anti-nationals support

terrorist activities in the country by providing monetary support to the terrorist
groups. This money helps helps them to purchase arms and ammunitions. Due
to demonetizations funds which they were using would be completely
vanished and thus promoting peace and harmony among people.

Some negative impact of demonetization is as follows:

1. Liquidity crisis:

Demonetisation gave rise to liquidity problems in the economy as people found

it difficult to get sufficient amount of cash to fulfil their basic needs. Marginal
section of the society mainly depends on cash to meet their transactions held
daily. Out of total currency in circulation 500 rupees notes constituted nearly 49%
in terms of value. More the time is required to resupply Rs 500 notes, the more
will be the time period of liquidity crisis.

2. Consumption:

Cash shortage adversely affected the consumption behaviour of people in India.

The sales of consumer durables likely to be hampered in short-term, especially
sales through unorganised channels are cash purchases. Most of the purchases by
retailers are through cash which brought down their value of trade.

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3. Decrease in GDP:

Withdrawal of higher denomination notes reduces the growth rate of the economy.
Demonetization reduces consumption pattern, income, investment etc. This may
bring down in India’s growth rate as the liquidity crisis itself may last 3-4 months.

The opposite of demonetization is remonetisation, in which a form of payment is

restored as legal tender. The sectors which faced problem by demonetization are
Banking, Automobiles, Cement, FMCG, Pharmaceutical and Agriculture.

Demonetization affected India’s stock market also.BSE and NIFTY both

crashed around 1689 and 541 points respectively in that week.

According to Investopedia, Demonetization is the act of stripping a currency

unit of its nature as legal tender.

Prime Minister announced that Rs 500 and Rs 1000 “will not be legal means
of money from midnight tonight” and these will be “just worthless pieces of
paper.PM also urged people to join this mahayajna against the ills of
corruption.

The sudden nature of the announcement-and the prolonged cash shortages in the
weeks that followed-created significant disruption throughout the economy,
threatening economic output.

The move was heavily criticized as poorly planned and unfair, and was met with
protests, litigations and strikes.

The main motive was to extract the value of black money from corrupted
people.

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 CHAPTER 3

Why India Demonetized 2 Currency Notes

Indian government’s surprise- In an address to the nation on November 8,

India‘s prime minister, Narendra Modi, declared that the two highest
denomination currency notes—the 500 rupee note and the 1,000 rupee note—
won‘t remain legal tender. The notes were demonetized at midnight on November
8. The move aimed to curb black money in the financial system. Black money is
one of the factors holding back the economy. The demonetization was a surprise.
Since the announcement, the media discussed the pros and cons for consumers and
the banking system (HDB) (IBN).

Lion’s share put out of circulation- According to the RBI‘s (Reserve Bank
of India) Annual Report for April 2015 to March 2016, the value of the currency
notes at the end of March 2016 was 16.42 trillion Indian rupees. The 500 rupee
and 1,000 rupee currency notes formed 86.4% of the value. In one stroke, the
government removed 86.4% of the currency in circulation by value. In terms of
volume, the currency notes of these two denominations formed 24.4% of a total
90.27 billion pieces. Also, RBI data showed that as of March 2016, 632,926
currency notes were counterfeit—known as an FICN (Fake Indian Currency Note).
As a proportion of NIC (Notes in Circulation), the 1,000 rupee and 500 rupee notes
were the highest. Nullifying these FICNs was also part of the demonetization
move. How Could Demonetization Impact the Indian Economy? Demonetization
will hit the economy The demonetization of the 500 rupee note and the 1,000 rupee
note—the two highest currency.

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 Short-term and medium-term impacts

Very short-term impact

The demonetisation, by removing 86 per cent of the currency in circulation, has
resulted in a very severe contraction in money supply in the economy. This
contraction, by wiping out cash balances in the economy, will eliminate a number
of transactions for a while, since there is no or not enough of a medium of
exchange available. Since income and consumption are intrinsically related to
transactions in the economy, the above would mean a severe contraction in income
and consumption in the economy. This effect would be more severe on individuals
who earn incomes in cash and spend it in cash. To a lesser extent it would also
affect individuals who earn incomes in non-cash forms but need to withdraw in
cash for consumption purposes, since a number of sectors in the economy still
work predominantly with cash.
In terms of the sectors in the economy, the sectors to be adversely affected are all
those sectors where demand is usually backed by cash, especially those not within
the organised retailing. For instance, transport services, kirana, fruits and
vegetables and all other perishables, would face compression in demand which is
backed by purchasing power. This in turn can have two effects: while it is expected
that supply exceeds demand, there would be a fall in prices, however, if supply too
gets curtailed for want of a medium of exchange, prices might, in fact, rise. Thus,
while generally people seem to expect prices to fall, it is quite possible that prices
would instead rise.
Alternatively, to keep the flows going, people might take recourse to credit - both
the retailers and other agents in the economy might make supplies on credit in the
hope that when the liquidity status is corrected, the payments can be realised. In
these cases, the price of commodities might rise instead of falling. In other words,
the impact of an incremental reduction in money supply where the demand and the
supply chain remain unaffected would be different from a case where there is a
drastic reduction in money supply and outputs might adjust rather than the

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adjustment being in prices. In other words, the expectation that inflation would
decline might be belied.
A further impact would be a compression of the demand for non-essentials by all
the agents in the economy in the face of uncertainty in the availability of cash. The
demand from segments which have access to digital medium of exchange would
remain unaffected, but that from the rest of the economy would get compressed.
This would transmit the effect to the rest of the sectors in the economy as well.
Another sector where one expects to see effects in the very short run is the real
estate space. With contraction in demand from one set of agents – say agents who
have earned unaccounted incomes and placed them within the real estate space –
either prices within this segment would fall or transactions would cease to happen.
While of itself, this would be considered a positive development and evidence of
a correction in the unaccounted incomes, it could lead to a compression in
investments in the construction sector which can have adverse income and
employment consequences for the economy.
There are likely to be two spin-offs from this change – one, there would be some
increase in tax collections in the short term, and second; various IOUs could
emerge as currency substitutes. To the extent people attempt to get rid of
unaccounted cash balances through purchase of goods and services and/or
payment of property taxes, one should witness a spurt in tax collections in indirect
taxes as well as property tax in the month after demonetisation which would
disappear thereafter. There is evidence already that property tax collections in
some cities are higher than last year. Similarly, in the case of currency substitutes,
at MCD tax collection centres at the border, people are being given IOUs in lieu
of the balance they were entitled to, which would be valid for six months.

Short-term effect with complete replacement:

The short-term effect on the economy would depend on the speed with which and
the extent to which the cash is replaced by the authorities. If the entire cash is
replaced within a short duration of time, the effects beyond the very short term of
1-2 months might be little. But a few sectors are likely to be seriously affected. To
give an example from two sectors which are supposed to have large employment

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effect on the economy, we can talk about agriculture, automobiles and
construction.
This is the sowing season for the Rabi crop in some parts of the country and the
harvesting season for the Kharif crop. Most of the purchases and sales in this
segment of the economy are carried out through cash. With the elimination of cash
from the economy, sale of kharif crop would be difficult unless the crop is sold on
the promise of payment in future. Given the limited bargaining power of the
farmer, the price they can realise for the crop can be adversely affected. On the
other hand, in the sowing activity, people would not get access to the inputs
required since most of the inputs are now purchased from the market unless they
seek access to credit from the supplier. In other words, with demonetisation, there
would be a significant strengthening of the informal sector credit market in the
rural economy. Further, if there are agents who do not get access to credit from the
informal sector agents, their sowing activity and hence their incomes in the next
season would be adversely affected. Thus, in spite of a good monsoon in large
parts of the country, the farmer might not get the benefits.
The second sector which could be adversely affected would be the construction
sector. The sector, it is often argued, works with a significant amount of cash.
Payments to workers as well as a variety of purchases might be carried out in cash.
So, on the supply side, this sector can be adversely affected. On the other hand, on
the demand side, the demand for houses and buildings would appear as a demand
for non-essentials and might be pushed on to the back burner until the economic
situation normalises. Thus, to the extent there are agents in the economy whose
demand was backed by savings from unaccounted incomes held in the form of
cash which got extinguished on demonetisation, there would be a compression of
demand.

Short-term effect with incomplete replacement:

If, on the other hand, the authorities choose to replace only a fraction of the total
cash that was surrendered by the people to the banking sector, then one would
witness some other changes/effects in the economy. For transactions to be restored
to the pre-change level, a number of agents who are using cash as a medium of
exchange have to move to using digital versions of money as the medium of
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exchange. While this change is gradually happening in the economy, if it is forced
by making cash inaccessible, the compression in demand as well as in income
generation in the economy would continue for a longer period until people get
familiar with the functioning and use of these media.

Medium-term effects:

In the medium term, the effects would be related to the extent to which the
currency is not replaced within the economy. If the entire currency is replaced,
there would not be any major effects on the economy. However, it is to be expected
that the entire currency would not be replaced – to the extent currency is
extinguished and to the extent some of the currency remains as bank deposits, there
would be some impact on the economy. The first effect would be a compression
of the economy to the extent the extinguished currency was working as a medium
of exchange. The currency that is placed in the banks but not withdrawn, it is
argued, would generate an expansion in deposits in the economy. In the
discussions on demonetisation, there is a consistent reference to the resultant
increase in credit creation in the economy. Like Finance Minister Arun Jaitley
says, “Bank deposits will increase and they will have more capacity to support the
economy.”4 The total cumulative credit that can potentially be generated is
defined in terms of the reserve ratio. Total credit potential = incremental deposit
generated*(1/reserve ratio).
In India, the cash reserve ratio is 4 per cent while there is a statutory liquidity ratio
of 22 per cent5 . In determining the credit creation, it is important to take into
account only the CRR and the additional credit creation can be 25 times the amount
of money deposited in the banks as a result of the proposed demonetisation.6 This
amount however, will be generated only if there exists an equivalent demand for
credit in the economy.
The official SLR is 22 percent but some transactions and deposits with the banks
have been excluded from the requirement of SLR. Therefore the effective rate of
SLR is lower.
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 6 SLR is not treated as a reserve for the bank since, it restricts only the instruments
into which the bank can invest but does not limit credit creation. Further, amount
invested in government bonds as a part of the SLR requirement would accrue to
the government and be spent. All expenditure by the government, as long as it is
expenditure within the domestic economy, will return the borrowed funds to the
economy thereby allowing for further deposits and credit creation akin to the
lending to private sector. Only to the extent the borrowing is used for purchases
from the international market, either by the government or by the private agents,
will the borrowing not create further credit in the economy.

Transition Issues

There are a number of transition issues that need to be managed for this transition
to be effective:

1. Infrastructure Issues:
There is need for a significant upgrade of the banking system as well as in the
telecom infrastructure that would provide the backbone for digital transactions.
For people to be able to transact at any time and place as well as for them to
consider it a reliable medium of exchange, it is important that not only the banking
system is upgraded to ensure that transactions can be completed without a hitch,
but the supporting infrastructure too is up to the mark. For instance, in many parts
of the economy, there is limited and intermittent supply of electricity as well as
mobile connectivity. In these areas, it would be difficult to expect people to shift
to electronic medium of exchange.
2. Consumer behaviour Issues:
Apart from the technological issues, there is a behavioural change that is being
expected in people from using cash as a medium of exchange to using other
cash substitutes both for making payments and receiving payments. This
transition requires individuals to make two changes in their behaviour: one,
agents need to move from tangible means which can be seen and felt to forms
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 which are less tangible or not tangible, and second, they have to learn to rely on
technologically advanced tools to undertake regular day to day operations. The
latter requires agents to be educated to the extent of comprehending the content
of transactions. If this transition is not suitably managed, agents might be
tempted to move to non-official cash substitutes.
3. Accessibility in language
In addition to all of the above, most of the banks and the mobile instruments for
transaction are currently adapted to a single to two languages. If the bulk of the
population of this country needs to come on board, it might be important to make
these facilities available in a myriad of Indian languages to ensure that the user
can comprehend the transaction that they are entering into.
4. Transition issues for banking sector:
There are multiple issues here.
a. The banks too might have a transition issue to deal with. Banks would have a
model of the fraction of deposits that they can safely lend without an excessive
risk of withdrawal of the amount. This is important since, while banks can borrow
money from the call money market, the costs of such borrowings can be large.
These models, however, might need to be altered in the new regime since the
character of the new deposits that come into the bank would be different from the
pre-existing deposits. In the latter, while a fraction of the deposits would be for
transactional purposes – e.g. salary earners – another fraction would be depositing
only savings into the account. By eliminating high value currency notes, these
agents who were operating through cash, would now have to move to non-cash
instruments and hence, the balances in their accounts would not be savings but
transaction values which will be retained in the account for shorter durations of
time. The banks therefore would need to re-model their decisions on how much of
the deposits can be lent out and for what duration. It is, for instance possible, that
a larger proportion of the deposits would be retained for short-term lending and
can even be dedicated to the call money market.
b. Second, while 1/reserve ratio defines the potential maximum amount of credit
that can be generated in the economy, the actual credit generation would be defined
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both by the demand for credit and the extent to which cash intervenes in the
functioning of the economy. For instance, if people who receive credit from the
bank make payments through cheques alone and they in turn make payments
through cheques, then the potential credit creation can be realised. However, if on
receipt of payment, the agent withdraws the money to cash and makes payments,
only a fraction of the credit/deposit will return to the banking system. Thus, larger
is the extent to which cash is used as a means of transacting, smaller is the total
credit that can be generated. With a withdrawal of cash from circulation, the
deposits will continue to remain in the bank, it would merely shift from account to
account or from bank to bank. Thus, even on the earlier deposits, the amount of
credit that can be generated would be larger. This is another reason why the banks
would need to remodel their investment decisions corresponding to a given level
of deposits.
c. A third issue that might arise as a transition issue is because of the mismatch
between people’s preferences for cash and the availability of cash. In the interim,
until people adjust to the use of non-cash instruments, there would be an increased
demand for the cash that is available and that might generate a situation where the
agents have to pay a premium to access legal tender. In periods of scarcity of coins
for instance, it is commonly known that people pay a premium to get the change.
While this can be considered a transition issue, there are two different implications
of such a development:
i. If the premium on cash is high, it would encourage both the shift to non-cash
instruments on one hand, and to informal substitutes of cash on the other.
ii. This might undermine the confidence that people have in the currency and
hence, encourage move to other currencies.

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 CHAPTER 4

Impact of demonetisation on the different sectors

Agricultural sector

GDP. In India more than 60 per cent of the population is directly or indirectly
depend on the agricultural or agricultural activities. Cash is the primary
mode of transaction in agriculture sector. The farmers struggled a lot at the
time of demonetisation because the saving habits as well the payment mode
of farmers were only on cash.

70% of the farmers market their products through farm markets or they may
be street vendors where cashless transaction is impossible. The farmers
who owned limited acres had not keep lump sum in bank accounts largely
due to fact of low income and no knowledge about the digital transaction,
which had a large impact on the farmers at the time of demonetisation.
Demonetization has affected every Indian, but it has hit the agricultural
sector the hardest. Because, farmers cannot buy seeds, fertilizers and other
things required for their winter crops. As results, wheat outcome was
decreased in northern India. Fruit and vegetable farmers were also badly hit.
They need cash on daily basis to purchase inputs like pesticides, fertilizers
and hired labour for harvest and also to transport and sell at urban centres.
Lack of cash with farmers leading to less-than optimal use of inputs resulted
in lower yields, reduced sales, higher wastage and lower price realization. In
the scenario of demonetisation of currency, most of the transaction going on
credit basis. The input dealers (seed, fertilizer and pesticide dealers) are
increasing prices by 20-30% of the normal price as the transactions were on
credit basis. In product market also big traders and commission agents are
offering credit to farmers at much higher interest (reaching 36% for just a
month) than in normal conditions. The cash crunch caused by
demonetisation affected farmers badly who were not acquainted with
cashless transactions .

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Manufacturing Sector

Demonetization of high-value currency notes in November

hit the manufacturing sector as indicated by a private sector survey.
The Nikkei India Manufacturing Purchasing Managers’ Index
(PMI) fell to 49.6 in December, the first time it hit below the 50-
mark in 2016, from 52.3 in November. A reading below 50 implies
contraction while one above 50 indicates expansion. Companies
saw new work and output dip for the first time in 2016. In turn,
quantities of purchases were scaled back and employment lowered.
.
According to Geeta Rani (2016), the production for some
industries has been impacted by the non-availability of select raw
materials (e.g., agriculture- commodities). Industries had cut
down production to adjust for the unanticipated rigger levels of unsold
finished goods across the supply chain. Supply chains had further getting
affected by the cash crunch faced by transportation vendors. Traders
and distributors were unable to pick up stock because of the liquidity
crunch.

There was a decline in trade and manufacturing output as industries were

knocking by the hard cash crisis. The Purchasing Managers' Index (PMI)
fell to 46.7 in November from 54.5 in October, recording its sharpest
reduction in three years. A reading above 50 indicates growth and a
reading below shows contraction. This indicates a slowdown in both,
manufacturing and services industries. The PMI report showed also
showed that the reduction in inflation in November was due to shortage in
money supply. The growth in eight core sectors such as cement, steel and
refinery products, which constitute 38% of the Index of Industrial
Production (IIP), was only to 4.9 percent in November as compared with
6.6 percent in October ( Siddiqui et.al, 2017).

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 Liquidity

Demonetization technically is a liquidity shock; a sudden stop in

terms of currency availability. It creates a situation where lack of
currencies jams consumption, investment, production, employment
etc. In this context, the exercise may produce following short
term/long term, consumption, investment and growth impacts on
Indian economy. The intensity of demonetization effects clearly
depends upon the duration of the liquidity shocks. Notes in
circulation as of November 4, 2016 was Rs.17,742 billion i.e., 13 per
cent of GDP and the value of Rs.500 and Rs.1,000 notes in circulation
was Rs.15,347 billion which was about 86.5 per cent of notes
in circulation i.e., 11 per cent of GDP (Hari, 2017). The
demonetization move along with the imposition of withdrawal limits
resulted in severe contraction in money supply and reduced the
usage of these notes and thus negatively impacted the liquidity.

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 CHAPTER 5

REVIEW OF LITERATURE

Guru and Shruti Kahanijow(2010),Researcher analyzed the black money

income? Need for amendment in DTAA & ITEA and analysed that black
money is spread everywhere in India up to a large extent which continuously
stashed towards abroad in a very large amount. The researcher also identified
how black money had caused menaces in our economy and in what ways it is
used.

Tax Research Team(2016),the main objective is to analyse the impact of

demonetization on Indian economy and it shows the impact of such a move on
the availability of credit, spending level of activity and government finances.

Sukanta Sarkar(2010),conducted a study on the India’s parallel economy :Causes,

impacts and government initiatives in which the researcher focused on the
existence of causes and impacts of black money in India. According to the study,
the main reason behind the generation of black money is the Indian Political
System that is the Indian government just focused on making committees rather
than to implement it .The study concludes that laws should be implemented
properly to curb black money in the economy.

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Abhani Dhara K. (2017) posits that this Demonetisation is proving to be more
successful than the previous two. The era is changing. People are using online
banking as a mode of payment. Bank employees are giving their best to make the
demonetisation a successful one. Their support matters a lot. Though the
demonetisation move has failed to grab total black money in the economy, this
has at least created fear in the minds of people holding black money. He
concluded that demonetisation was a compulsory step to tackle the problem of
black money, terrorism and corruption etc.

Veerakumar, K. (2017) posits that the announcement of demonetization of 500

and 1000 currency notes by the government is a big shock to the citizen of India.
The highest currency notes are withdrawn from the economy to counter the
problem of tax evasion, counterfeit currency and financing of terror activities. It
is shown that huge money is being deposited into the bank accounts which are
more than specified limits and are subject to penalties and taxes. Usage of e -
wallets, debit and credit card has been increased tremendously and this will
create better cashless infrastructure.

Shah, Ayash Yousuf (2017) stated that Demonetization is one of the major steps
in fighting against corruption, black money and terror funding. However, this
decision was taken without proper preparation and it adversely impacted the
public. Without printing enough new currency notes 86% of the currency notes
were withdrawn thrashing all market transactions. Only common people had to
face problems exchanging their notes, not the people who were targeted. With an
intention to rid the country of black money and dig out tax defaulters and black
money holders, the government has taken the step to demonetized Rs 500 and Rs
Page | 23
1000 notes. The sudden announcement of demonetisation and failing to plan
properly has created chaos among the general public. Common people are facing
problems buying with no money in their hands, wasting their time standing in
endless queues could have easily been avoided with advance planning.

Shambhogue Girish Kumar,A.Prashant,Bhat,Swathi and Shettigar,Chethan(2016)

defined currency ban as a move to stop counterfeit bank notes were allegedly
used for terror financing, as well as a surgical strike to black money and
corruption in the country. Demonetization leads to cash shortages in the country
which proves detrimental to a number of small business, agriculture and
transportation. The shortage of cash led to chaos and most people faced problems
to exchange their bank notes due to long queues outside banks and ATM’s across
the country. This demonetization step was proved to be the biggest attack on
black money and corruption in the history of Indian Economy and a movement
towards digitalization. It also encourages digital payments. They concluded that
Demonetization is advantageous in short, medium and long-term.

Muthulakshmi,E.Kamatchi(2017) in her paper entitled “Impacts of

Demonetization on Indian Economy – Issues &Challenges” states that when
money is withdrawn from the economy, the country will not be and meaningful
impact. She also states that the demonetization move, on one hand, was a serious
attack on black money,corruption,Hawala transaction, counterfeit currency and
terror financing. On the other hand, it had a negative impact on various sectors
like commodities such as gold and real estate.

Page | 24
Varshith J.R,(2016),In his study has stated that move to demonetize Rs 500 and
Rs 1000 currency tenders by the union government of India during the year of
2016 was a laudable and historic effort to clean up the decade’s long corruption
and black money. As Indian citizens we all should be proud of the fact that we
elected a government which was capable of taking such brave decision for the
long term betterment of the country’s economy. In the present economic situation
black money has inflated prices in real estate, gold and a few other sectors,
making it a challenge for a common Indian citizen to invest. However the
government’s attempt to eradicate black money will significantly lower the prices
in the economy.

Shukla,Bal Govind and Gupta,Hariom (2018) in their paper entitled “An

Exploratory Study of Business Students Perspectives On Demonetization in
India. With Special Reference to Allahabad City”. They used primary data for
their study and concluded that the people actively support any initiative taken by
the government which are basically targeted to eradicate corruption, black
money, and any other threats like terrorism and naxalism in the country.

P.Patnaik,(2016),stated that the black money is generated through evasion of

taxes on income from lawful activities and money created from illegal activities.
In the absence of steps to control and curb the generation of black money.
Demonetization is a futile exercise. Demonetization has been effected is leading
to a riot such kind of situation in the nation. We demand that the government
ensure that common people have immediate access to enough money to pay for
Page | 25
their daily needs and health emergencies. Failing which we demand the rollback
of demonetization to enable the common person to make adequate arrangements
for daily needs. The Government role behind it, is to undertake honest tax
administration and not to treat the common person like a criminal making
him/her stand in line and filling forms to access his/her own legitimate money.

P.Kumar.Vijay,(2016),in his study reviewed that the term demonetization is not

new to Indian economy. The highest demonetization note ever printed by the
Reserve Bank of India was Rs 10000 note in 1938 and again in 1954.But these
notes were demonetized in January 1946 and again in January 1978,according to
RBI data statement. The Reserve Bank of India manages currency in India and
derives its role in currency management on the basis of the Reserve Bank of India
Act 1934 and a new redesigned series of Rs 500 banknote in addition to a new
denomination of Rs 2000 banknote is in circulation
since November 10,2016.The decision was taken to curb the illegal means of
money which was used for corruption in the country.

Dr. Mathur Neeti, Dr. Mandal Nivedita, Dr. Kalyani Sushil

On the government announced its decision to discontinue the legal tender status
of Rs. 500 and Rs. 1000 notes. The behind the demonetization policy attempt to
curb black money, regularising prices, create corruption free environment, stop
flow of funds to illegal activity, make people accountable for every rupee they
possess and pay A study by the National Investigation Agency and the Indian
Statistical Institute, conducted in 2016, estimated that fake Indian currency notes
in circulation have a face value of before the recent decision of demonetization of
Page | 26
500 and 1000 rupee notes.
The government has taken few steps in this direction much before its
announcement. Government insisted people to open Bank account in Jan
DhanYojana. They were asked to deposit all the money in their Jan Dhan
accounts and do their future transaction through banking only.

Another step that the government initiated was a declaration of the income and
had given October 30, 2016 deadline for this purpose. Through this method, the
government was able to wipe up a huge amount of undeclared income. It was a
bold step of our government, many economic expert their opinions and several
research studies are conducted on demonetisation. This provides a systematic
review of literature on the demonetisation. Various empirical studies are carried
out in India and rest of the world on demonetisation. The study is limited to
twenty seven research studies and expert opinions on demonetisation. The aim of
this paper is to do logical and structural appraisal of existing literature to
determine the relevance of demonetisation in respect of its motives.

The idea behind demonetization was

1. To eradicate black money

2. To increase digital

transaction

3. To remove

counterfeit notes

Page | 27
4. To prevent Naxal activities and terrorist activities

Regarding black money government has told in parliament that 4.9 lakh crore
rupees deposited in various accounts is under scrutiny .If this is true then the
Indian government will get 2.5 lakh crore in taxes next year and 1.5 lakh every
year in taxes in the future from this unearthed money.

The digital transactions has increased then dipped and now settled at 107 lakh
crores in July in the year 2018.

Due to demonetization the Naxal and terrorist groups which were engaged in
throwing stones has completely stopped .This can be assessed by the reduction in
Naxal attacks and drastic reduction in stone pelting in Kashmir post
demonetization which will help to maintain peace and unity among the citizens of
the country. Demonetization is a disruptive economic tool in the hands of
government which are also known as policy makers to control the cash flow in
the economy.

Page | 28
 Chapter 6

Research Methology

OBJECTIVES OF THE STUDY:

The objectives are designed to have a particular direction to study like what aspect
is to be studied. A topic can be studied from various parameters, the objectives
designed for a project gives an hint that in what manner the topic is studied, what
is the flow of project, what are the variables selected for the project, etc.

 To discuss the various marketing strategies that can be adopted while

facing an environmental change. To design steps to tackle environmental

change while the organization is facing a resource crisis.

 To study the experience of impact of demonetization in

various countries in past years; To analyse the current

immediate impact of demonetization on Indian economy.

 To workout the probable consequences

of Demonetization.

 To understand meaning and reasons of

demonetization.
 To study the sector wise changes in the economy.

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HYPOTHESIS OF THE STUDY:

Hypothesis is referred as the assumptions made by an individual to study the

research project. These assumptions are made in a way to satisfy the objectives
framed for the project. Framing of hypothesis is an important part of the research
as in this step the research problem or the problem statement is designed on which
the entire research is based.

The hypothesis or the research problem of the study is designed in such manner
to find out the relationship between the variables,i.e does the effect has any impact
on the other. We can also say that following hypothesis will let us know how
closely they are correlated with each other. In order to study this topic 2
hypothesis are framed.

Hypothesis 1:-

Ho:There is no significant relationship between pre and post demonetization

period. H1:There is significant relationship between pre and post demonetization

period.

Hypothesis 2:-

Ho:There is no significant impact of money supply on Indian Economy during

pre and post demonetization period.

H2:There is significant impact of money supply on Indian Economy

during pre and post demonetization period.

Page | 30
 RESEARCH GAP

A larger number of studies have been conducted on the subject at national as

well as international level. Few researchers have tried to evaluate Impact of
demonetization on the Indian economy. Therefore the present study aims
measure the impact of Demonetization in pre and post period and also tells us
how it has affected the various fields in the economy. A pie chart explains the
role of demonetization on the Indian economy in certain period of time.
Research gap helps to focus on the area which is yet to be explored or is under
explored. It could be (size, type, location, etc.),research method, data collection
or analysis of data and other variables and conditions. It is also considered as a
missing piece in research literature.

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SIGNIFICANCE OF THE RESEARCH

During the pre demonetization period,RBI has come out with its annual report
giving a balance sheet of demonetization implemented 21 months ago. Of Rs
15.41 lakh crore demonetized currency notes of Rs 500 and Rs 1000
denominations, only Rs 10,720 crore did not reach to the Reserve Bank of
India.

This means only 0.7 percent currency notes were junked in the exercise. While
announcing demonetization on November 8 in 2016,PM Narendra Modi had
outlined three broad objectives to curb black money, corruption and stop
terrorism. These objectives have always been debateable for the lack of
accurate verifiable data. Indian economy lost 1.5 percent of GDP in terms of
growth. That alone was a loss of Rs 2.25 lakh crore a year.

During post demonetization RBI dividend reduced to half of the amount, and
also India’s money market had the overall circulation of banknotes worth Rs
17.97 lakh crore On November 4,2016.The banned denominations constituted
86.4% of the total money in circulation.Today,according to the RBI,overall
banknotes in circulation are worth Rs 18.03 lakh crore(March 2018).This
means the volume of currency in circulation is 9.9 percent more compared to
March 2016.

Page | 32
DATA COLLECTION METHOD

The data collection method means the various sources from where the data
has been collected by the researcher. There are several methods for data
collection, especially in the surveys.

For the purpose of Research, the primary data was collected through a close ended
questionnaire which was designed pre hand and an online survey was done using
google forms. Close ended questionnaire is the best method for data collection as
uniform observations are maintained through it.

For the purpose of secondary data collection, the researcher has used various
materials such as newspapers,websites,articles,etc related to the topic. Due to
unavailability and shortage of time books weren’t used. The secondary sources
helps to explain the review of literature of the project and helps to provide
detailed information related to the topic.

Page | 33
RESEARCH DESIGN:

A research design is the detailed print which is used by the researcher to guide
a research study towards its objectives. It helps to collect, measure and analyse
the data.

The present study seeks to find out the people’s opinion towards
demonetization. The study also aims at findings out the impact of
demonetization on each and every individual and also the impact on Banks,
Indian economy.

The study on impact of demonetization is quantitative in nature. It is structured,

standardized and a question based interview.

SCOPE OF THE RESEARCH

It Is early to come to any conclusions. Few months results will not help to
conclude the long term impact. Demonetization has a wider scope in the Indian
economy in respective fields. Here I am mentioning only two fields.

Widened scope for Retailers:CDFI’s executive director Krishnan

Dharmarajan and principal architect of digital innovation lab led the study.

“We started our research two years back looking at how kirana stores go
cashless-what are the drivers, what are the barriers and the cashless
ecosystem around the Kirana stores. Our study was to find out how poor can
be central to the technology –driven transaction”,Dharmaranjan said.Around
63 percent of the retailers wanted to go cashless, which was about 31% before
Page | 34
the note ban. He also said that more digital interface would help create a
transaction history for the small retailers and enable them to get loans from
the banks.

This would lead the way for more entrepreneurs in the market from different
parts of the country.

Demonetization affects farmers:

The first method to link the farmer with digital payments platform was
introduction of Kisan Credit Card.Since then, various other schemes and
programs have been launched to empower the farmer. Flexible loans in presence
of adequate capital with the banks is indeed a matter of joy to the farmers. To sum
up, flexible loans, quick funds transfers, easy access to funds through ATM’s and
concrete crop insurance policies are some of the amenities that the farmer will get
within a certain period of time.

LIMITATIONS OF THE STUDY:

Limitations of a research project arise when there are uncontrollable variables

which are difficult in controlling it. It helps to maintain accuracy of the output.
However ,for this study only 65 responses were taken into consideration.

The period of research was short hence the researcher was unable to

gather more responses. The research sample size was limited.

Page | 35
The applicants responded the set of questions enthusiastically. The set of
questions designed by the researcher helps to derive the actual desired
output for the solution.
IMPACT

Demonetization had a notable effect on the tax base and tax revenue, while
also leading to a substantial surge in digital transactions and the
formalization of the economy. It can be observed that out of a total of 15.44
trillion invalidated currency, 99 percent, which is 15.28 trillion, has been
deposited back into the banking system, leaving only 16,050 crore outside
of the system. As a result, the government's belief that a considerable
number of individuals would not come back and their expectation of
receiving some reserves from the central bank was proven wrong. In
contrast, the RBI only paid a dividend of Rs 32,000 crore in 2016-17,
significantly lower than the previous year. The decrease in GDP growth
had a significant impact on the SME sector, causing them to face financial
difficulties and resulting in a considerable number of job cuts. The
agriculture industry, which primarily operates with cash transactions, also
demonstrated a lack of activity.
During the time of demonetization, there was a noticeable reduction in
instances of terrorism and the issue of naxalites also experienced a
significant decrease.
The following are the notable consequences of Demonetisation-2016:
i) Expanding the tax base was greatly influenced by the implementation

Page | 36
 of demonetization, resulting in a notable increase. In the fiscal year
2016-17, 9.1 million new taxpayers were brought in, followed by
12.8 million in 2017-18. This rise in numbers can mostly be credited
to the effect of demonetization and the efforts made by the Income
Tax Department through initiatives like Operation Clean Money that
were implemented after demonetization.

It can be said that the number of new taxpayers increased to 3.1

million in 2014-15 and 3.6 million in 2015-16. So, the number of new
taxpayers in 2016-17 and 2017-18, which is 9.1 million and 12.8 million,
respectively, is significantly greater and can be attributed to the impact of
demonetization.
Despite the potential influence of additional government measures such
as the implementation of GST in 2017 and enhanced tax administration,
the key factors that continue to have a significant impact are
demonetization, the depositing of cash into bank accounts after
demonetization, and the efforts made by the tax department to include
these individuals in the tax system.
During the whole Financial Year 2016-17, the combined number of
electronic and paper returns thatwere filed increased by 17.3% compared
to the returns filed in FY 2015-16. In the fiscal year 2016-2017,
approximately 12.6 million new taxpayers (including those who filed tax
returns and those who made tax payments without filing returns) were
added to the pool of taxpayers. This is a substantial increase compared to
the previous years, where only about 3 to 3.5 million new taxpayers were
added. These figures demonstrate the noteworthy influence of

Page | 37
demonetization on the number of individuals contributing to the tax base.

During this time, the daily allotment of permanent account numbers

(PAN) also rose from 100,000 to 200,000, resulting in a total of 300 million
PAN assignments listed in the PAN directory.
The impact of demonetization is evident in the increase in direct tax
collections, particularly in the collections of personal income tax. It can be
observed that there was a growth of 41.79% in advance tax collections from
personal income tax until August 2017, compared to the same period in the
previous fiscal year. The self-assessment tax collection demonstrated an
increase of 34.25 percent compared to the same period in the previous fiscal
year. 2016-2017 marks a period when people had to pay higher taxes
leading to its occurrence. Therefore, demonetization played a role in
increasing the number of individuals included in the tax system. The
implementation of Aadhaar-PAN linkage by the Income Tax Department
resulted in the identification of individuals possessing black money under
multiple PAN accounts. Therefore, due to the public's understanding of the
importance of establishing a society that complies with tax regulations, the
government's efforts to promote transparency through Aadhaar
identification will likely be successful in the near future. After the
demonetization process, the Income Tax Department initiated Operation
Clean Money (OCM) on January 31, 2017. Its purpose was to examine the
cash deposits made in bank accounts and utilize data mining software to
pinpoint any discrepancies between these deposits and the corresponding
tax returns. The initial examination of data conducted by the CBDT
indicated that around 36 percent of individuals who deposited cash during

Page | 38
the demonetization period from November 8, 2016, to December 30, 2016,
did not submit tax returns. Additionally, 40 percent of these depositors were
operating businesses as sole proprietors, whereas a mere 2 percent were
corporate taxpayers; however, this small group accounted for 14 percent of
the total cash deposits.
Approximately 6.7 percent of all depositors were individuals with salaries,
yet their combined amount of cash only accounted for approximately 4.3
percent. 400,000 was the average cash deposit amount for small businesses
and individuals. 42 lakhs for non-corporate taxpayers to Rs. 1.37 crore in
the case of corporations. Small businesses and proprietorship concerns
made up around 56 percent of the total cash deposits, whereas corporates
accounted for approximately 22 percent, and the remaining portion was
contributed by individuals and others.
One positive aspect of the demonetization program was the connection it
created between reducing currency in circulation and the adoption of digital
transactions. Undeniably, demonetization motivated individuals to adopt
digital forms of payment. Despite the obstacles in digitalization, such as the
introduction of new technology platforms like PayTM, RuPay, and Bhim
app, the pace has gradually improved. However, demonetization has
significantly propelled us towards a cashless society.
Demonetization has made digital transactions increasingly common and
accepted, as shown by the rise in popularity of digital payment methods,
tools, and organizations. Online payments are widely used among more
advanced groups. The informal economy has also been reduced due to the
rise in digital payments resulting from demonetization.
Approximately 15.44 lakh crore, consisting of Rs 500 and Rs 1000 notes,

Page | 39
were rendered invalid. This resulted in only Rs 3 lakh crores remaining,
causing a detrimental impact on businesses and disrupting regular
commercial dealings. The economy was hence re-monetized by introducing
new denominations of Rs.2000 and Rs.500 notes. Nevertheless, due to the
implementation of demonetization, the overall amount of currency in
circulation has significantly decreased to Rs 15.32 lakh crore. This is a
decrease of more than Rs 3 lakh crore compared to before the
demonetization period. Essentially, it represents approximately 9% of the
GDP and seems to be a more stable and manageable level. This has also
played a role in controlling the inflation.
The time of demonetization witnessed a record-breaking surge in
counterfeit currency, with suspicious transactions rising by more than 480
percent after demonetization. In 2016-17, banks collectively produced over
4.73 lakh suspicious transaction reports (STRs), representing a 400%
increase compared to previous years. The Financial Intelligence Unit (FIU),
which investigates suspicious financial transactions related to illegal money
laundering and financing terrorism as a part of the Union Finance Ministry,
stated that there was a rise of more than 322,000 cases of fake currency
transactions in the fiscal year of 2016-17. According to the report released
by the RBI, approximately Rs 410 crore fake currency was identified during
the demonetization phase. Nevertheless, the mentioned statistic does not
imply the exercise's triumph or failure since the complete recovery of
counterfeit money was not anticipated, and demonetization does not assure
the absence of fake or recently introduced counterfiet currency.

The prevention of illicit funds and corruption was a significant goal of the

Page | 40
demonetization effort. There are no precise figures available regarding the
amount of undisclosed money in India. Nevertheless, the issue of black
money has persisted from the outset and was deemed by the Wanchoo
Committee as detrimental to India, with potential to severely harm the
economy. Corruption can be defined as the misuse of authority for personal
benefit, as stated by Transparency International. It encompasses various
aspects and is influenced by various factors, resulting in a range of
consequences. This issue is deeply rooted in Indian politics and reflects the
declining morals of society. This issue is deeply ingrained. Corruption has
been widely observed across various sectors, presenting itself in various
forms such as bribery, kickbacks, and facilitation payments.

Corruption has rendered most of the institutions in the nation inactive.

Demonetization had a significant effect on the existing illicit money in the
form of physical currency. This money was either exposed when it was
deposited into bank accounts, causing it to lose its anonymity. In addition,
instead of placing it in the bank, the owner may choose to destroy it
themselves causing its destruction. Another option exists where a hoarder
could modify their hoard through illicit methods, either by using a different
type of currency or engaging in certain investment activities.
It is crucial to analyze both the positive and negative consequences of any
policy action implemented by the government. In that regard,
demonetization only had a regressive effect by eliminating or exposing the
pre-existing illicit funds in the form of physical currency. It would have no
effect on the ability to prevent future generations from illegally
accumulating funds or prevent the conversion of such funds into various

Page | 41
assets such as real estate investments.
The government's future actions and policies will determine the fate of
illicit financial activities involving black money. However, one thing is
certain: it has raised awareness about the existence of undisclosed income
among the general population and instilled a sense of fear in those who
hoard such illicit funds.
In terms of negative effects, demonetization greatly harmed GDP growth
and employment from 2016 to 2018. After the elections, the economy
started to improve and was expanding at roughly 8 percent in the fourth
quarter of the fiscal year 2015-16. However, it gradually declined to 5.7
percent in the second quarter of 2017-18. This decrease had significant
consequences on the government's fiscal deficit and its ability to spend on
social programs.
Nevertheless, the decline in GDP growth cannot be solely attributed to
demonetization alone, as the introduction of GST may have also had a
substantial adverse impact on it. Many people believe that the government
should have implemented the major reforms with more time in between in
order to prevent the negative consequences.

Impact on Businesses: Demonetization had a significant negative effect on

small and medium enterprises, particularly those in the informal sector, due
to their limited access to cash flow. Many small businesses shut down,
resulting in a negative impact on employment and a significant decrease in
the opportunity to create new jobs. The demonetization move had a
negative impact on the micro, small, and medium-sized enterprise (MSME)
sector, which is crucial for the economy and employs over 80 million

Page | 42
people. This sector primarily relies on cash payments for wages.
The decline in cash liquidity had resulted in a decrease in demand for
different products, leading to unemployment. Additionally, it was
discovered that the organized manufacturing sector also suffered negative
consequences, as demonstrated by the decrease in sales of fast moving
consumer goods (FMCG) and automobiles during the period from
November to January.
The manufacturing PMI showed a continued decline in December, 2016.
Additionally, there was a slowdown in the rate of growth for exports in
November.

The agriculture sector, which employs the highest number of people,

experienced severe negative consequences due to demonetization. In this
industry, the majority of transactions are done in cash, so when there was a
shortage of available funds, it had a negative impact on buying seeds and
fertilizer. As a result, planting and agricultural production were negatively
affected.
Fruit and vegetable growers experienced a severe impact. They require
money to buy pesticides, fertilizers, and manpower for farming activities,
including cultivation, harvesting, transportation, and selling in towns and
markets. Therefore, as a consequence of a lack of liquidity, there was a
decrease in returns, a decline in sales, an increase in waste, and a reduction
in the amount received for products or goods. In addition, retail vendors
selling vegetables encountered another challenge due to insufficient
demand, resulting in a significant amount of their products being wasted as
they are prone to spoilage. Additionally, due to a severe lack of Rs 500

Page | 43
notes and a shortage of change for the higher value Rs 2000 notes, the
vegetable and fruit vendors' sales were negatively impacted. This was also
causing small vendors to lose customers to large retail markets, ultimately
affecting the incomes of those in the unorganized sector.
The farmers' employment was affected by their lack of cash, as they were
paid in cash for their agricultural work. The majority of agricultural
financing is done through cooperative banks. However, these banks were
prevented from accepting demonetized currency through exchange-deposit,
which had a negative impact on the farmers.
During the demonetization period, there were disruptions in the supply
chain of agricultural produce in mandis, which are primarily cash-based,
affecting their sales, marketing, and distribution processes. Additionally, it
has been discovered that there was minimal lending activity by the banks
during the demonetization period, which coincided with the peak season
for sowing Rabi crops. The farmers faced serious difficulties in purchasing
farm machinery since they did not possess PAN cards, which are mandatory
for conducting bank transactions exceeding Rs. 50,000. The absence of
banks and ATMs in rural regions decreased access to cash for farmers,
allowing illegal moneylenders, black marketers, and middlemen to exploit
the situation.

Page | 44
 Chapter 7

Findings

The data was collected from primary and secondary sources. For the only
primary a survey was done online and 65 responses were collected by the
researcher, whereas secondary data was collected from multiple websites and
journals.

The findings of primary data were as follows:

In the View of respondents it is learnt that demonetization was not only the last
resort to clean economy but also had both positive and negative economic impact.

Respondents have agreed that in developing countries demonetization could be

favoured rather than opposing it .

As per the Indian market and Society, demonetization can be favourable to

reduce the corruption in India and stabilise the economy to a major extent.

It was seen that the common man had to suffer due to quick implementation made
by the government as there were long queues seen outside the bank for many
days. However on the other hand the black was curbed through many corrupted
civilians.
Page | 45
It has also led to a digitalized India where we can see many retailers and
wholesalers supporting digital money transfer and supporting the country to “go
cashless”.

It was a major step taken by the government of India to curb the black money
and also few more steps can be taken in similar and different ways to end the
corruption completely.

Page | 46
 Conclusion

Through the survey and data collected it is concluded that, demonetisation is a bit
serious problem. The move by the government to demonetise the old
denominations with the new ones has surprised the country. The move was an
effort to handle the threat of illegal money,corruption,terror funding and
counterfeit currency. According to the survey, people agree that demonetisation
is a good effort taken by the government of India, it would bring about a positive
impact on Indian economy as it encourages the digital modes of payment such as
E-wallets and apps,online transactions. It is a move towards cashless economy.
Demonetization is beneficial for the economy in the medium to long term. The
decision taken by the government of India was quick so some were against
it.However according to the survey, majority of the applicants responded that
demonetisation hasn’t reduce corruption in India. And major strengths of Indians
believe that demonetization will help to stabilize the economy.

Page | 47
 Suggestion

Demonetization was a measure step taken by the government of India to deal

with black money which was is in abundance in Indian market and society.

All ATM’s should have both withdrawal and deposit facilities, regular and
biometric facility.

Educate everyone about the use of e-wallet and Debit and Credit Cards.

Camps should be organised at village levels and city levels at each and every
corners.

Give every businessman, who has current account with banks, swipe machine at
the earliest possible.

Incentivize savings and private Investment.

Cut down on lending Rates.

Scrap the income tax in a decent manner.

Page | 48
Simplification of GST

End the raid culture

Agriculture needs global push

Roll back the customs duty on gold.

Page | 49
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