ECONOMICS

PROJECT
NAME : ABHINAV JAIN
CLASS : XI-D
ROLL NO. : 02
SCHOOL : SACHDEVA PUBLIC SCHOOL
SESSION : 2018-19
DEMONETISATION
ACKNOWLEDGMENT
I would like to convey my heart felt thanks to my ECONOMICS Teacher
Mrs. MONA JAIN who guided me through the project and gave
valuable suggestions and guide me for completion of my project.
I would like to thank our PRINCIPAL who gave me the golden
opportunity to work on this wonderful project on the topic
DEMONETISATION in Economics.
A special thanks to my Parents and Friends who helped me a lot in
finalising my project within the limited time frame.

3 JANUARY 2019
ABHINAV JAIN
CERTIFICATE
This is to certify that ABHINAV JAIN of class XI – D has
consented his project as partial submission of certificate as
required by Central Board of Secondary Education for
ECONOMICS. It is certified that this project is an original
piece of work and completed under my guidance and
according to the instructions given by Central Board of
Secondary Education, DELHI.

10 JANUARY 2019
MONA JAIN
 TEACHER
S NO. TITLE PAGE NO.
SIGN
1. INTRODUCTION 1
2. HISTORY AND BACKGROUND 2

I
3. COUNTRIES THAT HAVE TRIED DEMONETISATION 3
4. PURPOSE OF STUDY 4
5. MEANING OF DEMONETISATION 5

N 6.
7.
8.
FEATURES OF DEMONETISATION
MERITS OF DEMONETISATION
DEMERITS OF DEMONETISATION
6
7
8

D 9.

10.
CASE STUDY
DEMONETISATION IN INDIA – 1978 AND 2016
IMPACT ON INDIAN ECONOMY
9

17

E 11.
12.
QUESTIONNAIRE
DATA ANALYSIS
18
20

X
13. OBSERVATION AND FINDINGS 31
14. STUDENT’S OWN VIEW 32
15. CONCLUSION 33
16. BIBLIOGRAPHY 34
INTRODUCTION
Demonetization refers to discontinuing of current currency units
and replacing those currency units with new currency units. It is a
major decision and it impacts all the citizens of the country because
overnight all the money you have become a piece of paper which
has no value if you do not exchange it with new currency units or
deposit it in the banks.

1
 HISTORY & BACKGROUND
In India, there were many occasions when high denomination banknotes were
demonetized. RBI printed the highest denomination notes of ₹10,000 in 1938.
After that government demonetize ₹1,000 and higher denomination
banknotes in 1946. Higher denomination banknotes (₹1,000, ₹5,000, ₹10,000)
reintroduced in 1954 and all of them were demonetized in 1978 to curb
unaccounted money. First time ₹500 banknotes were introduced in 1987 in
order to restrain over increasing banknotes, due to inflation and in 2000 again
₹1000 banknotes came back in circulation in order to contain the volume of
bank notes in circulation, due to inflation. However, ₹2,000 banknotes were
first time introduced in Nov 2016.
Along with India, many countries in the world had
done demonetization in the history. Almost
countries that had done demonetization had some
common objectives of demonetization which were
to curb corruption and black money and their
government decided to demonetize their higher
denomination notes to get rid of these problems.
2
COUNTRIES THAT
HAVE TRIED
DEMONETISATION
 UNITED STATES (1873)  ZAIRE (1993)
 UNITED STATES (1969)  AUSTRALIA (1996)
 INDIA (1978)  EUROPEAN UNION (2002)
 GHANA (1982)  NORTH KOREA (2010)
 NIGERIA (1984)  ZIMBAWE (2015)
 MYANMAR (1987)  INDIA (2016)
 SOVIET UNION (1991)  VENEZUELA (2016)
3
 PURPOSE OF STUDY
The aim of this study is to study the previous instances
of demonetization round the world. In these cases,
what were the aims of the countries and what
happened to them next, is also collected in the study to
understand the possible outcomes of our
demonetization to reduce the negatives and to
maximize the positive ones by learning from the good
decisions taken by the various countries as well as by
the mistakes made by them.
This study would help in understanding the cost benefit
analysis of demonetization in India. This study would also
help in finding out the sectors that are affected due to
demonetization and appropriate actions could be taken
by the government by modifying the policies accordingly.
This study also shows the way to government to take the
decision by observing the objectives and the results of
demonetization done in many countries in past.
4
MEANING OF DEMONETISATION
Demonetization of currency is a radical monetary step in which a
currency unit’s status as a legal tender is declared invalid. It occurs
whenever there is a change of national currency. The current form
or forms of money is pulled from circulation and retired, often to be
replaced with new notes or coins and sometimes a country
completely replaces the old currency with new currency.

5
 FEATURES OF DEMONETISATION
 Increases Deposit Base & Savings: Currency demonetization
increases deposit base and savings as individuals will deposit
more and store less physical currency at home.
 Direct Boost to The Jan Dhan Yojana: Jan Dhan Yojana
accounts have a very high number of dormant or unused
accounts. These accounts have suddenly seen a spike in
usage, and individuals who’ve had these will finally start using
them and it might help them in inculcating banking habits.
 Added Support for Government Finances: The Government
will significantly benefit from the additional cash that is
pushed into the economy. There will also be a much higher
collection of income and other taxes by the Government.
 GDP Growth Potential: More than short term benefits, there is an angle of long term
GDP growth as well, which we should be able to observe over the next few years. This
move could positively impact the GDP figures of our economy.
 Long Term Benefits: A few might criticize this move at present, but it will bring multiple
long-term benefits for the nation’s economic health. This entire exercise might be
slightly discomforting, but demonetization will definitely have long-term benefits and
implications. 6
 MERITS OF DEMONETISATION
 Controlling inflation: Demonetization is usually cited as having one key
advantage: this is that it can control inflation. Taking certain notes out of
circulation can help the government to control public spending.
 Tax Collection: Money deposited in the bank during demonetization can be
taxed especially if the affected parties were trying to evade taxation by
keeping hard cash.
 The move to digital currency: Some commentators argue that in the future,
we will all be using digital currency, such as bitcoins. If this is true, then one
advantage of demonetization is that it will help to propel us into the future.
 Getting fake currency out of circulation: Demonetization
can also be used to get fake currency out of circulation in
a country’s economy since such currencies cannot be
deposited in banks and other financial institutions.
 Reducing illegal activities: Money used to fund illegal
activities such as terrorism and drug trafficking will be
rendered useless. Hence, the government can use
demonetization policy to trace money that has been
made from illegal activities such as drug trafficking and
theft since such individuals are faced with only two
options: either deposit the money with the bank or be
left with currency that has no value. 7
 DEMERITS OF DEMONETISATION
 Little cash in circulation: Cash crunch is a major disadvantage of demonetization due to the
unavailability of small currency denominations, an issue which makes it difficult to make
small purchases.
 Inconvenience and annoyance to the public: Sometimes, demonetization can be very
inconvenient. For example, sometimes the government will remove certain denominations of
bank notes from circulation but keep others. It can be annoying when smaller coins are
removed from circulation and you do not have enough change. Further, queuing up in banks
to deposit money or exchange currency can be inconveniencing.
 Slowdown in Economic Growth: Economic growth will experience a period of lull due to
business disruptions, at least in the short term.
 Disruption of Trade: The normal trading activities may be
disrupted by this process since it takes time for consumers and
suppliers to adjust to the new monetary policy.
 Short term financial crisis for poor people: If people adopt a new
currency and this currency is not a successful one, then it can
cause a financial crisis for everyone who is involved. Even a small
change in the value of everyday items, or even a small amount of
confusion about whether a currency is valid can mean a lot of
hardship. As such, demonetization can increase and exacerbate
inequalities within society, at-least in the short term. 8
CASE STUDY

DEMONETISATION
IN INDIA
9
CASE STUDY 1
DEMONETISATION
IN 1978

10
 The High Denomination Bank Notes (Demonetisation) Act, 1978, of
India is a law passed in the Indian Parliament, ceasing the usage of high-
denomination bank notes of ₹1000, ₹ 5000, and ₹10000. On 16
January 1978, the then President of India Neelam Sanjiva
Reddy introduced the High Denomination Bank Notes
(Demonetisation), Ordinance 1978. The then Prime Minister of
India, Morarji Desai of Janata Party, Finance Minister Hirubhai
Mulljibhai Patel, and 14th Governor of Reserve Bank of India
Indraprasad Gordhanbhai Patel (I. G. Patel), are considered the key
architects in the development and execution of the policy.
 The Preamble to the Demonetisation Act 1978 highlights the need for
demonetisation of high denominations, in the public interest. The
usage of high-denomination bank notes was considered detrimental to
Economy of India, due to illegal financial transactions facilitated by
high-denomination bank notes.
 The Act was passed by consideration in both Houses of Parliament and
Supreme Court, and was implemented by an issue of an ordinance on
16 January 1978, which was later made an Act, from 30 March 1978.
11
 LOOK BACK TO
1978 DEMONETISATION

12
CASE STUDY 2
DEMONETISATION
IN 2016
13
 On 8 November 2016, PM Narendra Modi of BJP announced
the demonetisation of all ₹500 and ₹1000 banknotes of the Mahatma Gandhi
Series. It also announced the issuance of new ₹500 and ₹2000 banknotes in
exchange for the demonetised banknotes. The government claimed that the action
would curtail the shadow economy and reduce the use of illicit and counterfeit
cash to fund illegal activity and terrorism.
 The announcement of demonetisation was followed by prolonged cash shortages
in the weeks that followed, which created significant disruption throughout the
economy. People seeking to exchange their banknotes had to stand in lengthy
queues, and several deaths were linked to the rush to exchange cash.
 According to a 2018 report from the Reserve Bank of India, approximately 99.3%
of the demonetised banknotes, or ₹15.30 lakh crore (15.3 trillion) of the ₹15.41
lakh crore that had been demonetised, were deposited with the banking system.
The banknotes that were not deposited were only worth ₹10,720 crore (107.2
billion),leading analysts to state that the effort had failed to remove black money
from the economy. The BSE SENSEX and NIFTY 50 stock indices fell over 6 percent
on the day after the announcement. The move reduced the country's industrial
production and its GDP growth rate.
 Initially, the move received support from several bankers as well as from some
international commentators. The move was also criticised as poorly planned and
unfair, and was met with protests, litigation, and strikes against the government
in several places across India.
14
15
16
IMPACT ON INDIAN ECONOMY

17
 QUESTIONNAIRE
Q1. Do you think demonetisation helped achieve its aim of curbing black money?

O YES O NO O Somewhat O Can’t Say

Q2. Do you think demonetisation hurt the Indian economy?

O YES O NO O Somewhat O Can’t Say

Q3. Do you think well connected insiders knew about demonetisation before November 8?

O YES O NO O Somewhat O Can’t Say

Q4. Do you think demonetisation would negatively impact the ruling NDA in 2019 general elections?

O YES O NO O Somewhat O Can’t Say

Q5. Is it difficult for you to get change for Rs. 2000?

O YES O NO O Somewhat O Can’t Say

18
Q6. Has your use of digital modes of payment increased since demonetisation?

O YES O NO O Somewhat O Can’t Say

Q7. Were the poor more affected because of demonetisation than the middle class?

O YES O NO O Somewhat O Can’t Say

Q8. Do you think people in rural India became aware of digital world and started using payment
applications?

O YES O NO O Somewhat O Can’t Say

Q9. Has demonetisation further led to shrinking of job market?

O YES O NO O Somewhat O Can’t Say

Q10. Do you think demonetisation will have a positive impact on our economy in the long run?

O YES O NO O Somewhat O Can’t Say

19
 DATA
ANALYSIS
20
 Q1. Do you think demonetisation helped achieve its aim of curbing black money?
O YES O NO O Somewhat O Can’t Say

RESPONSE
1
4 NO. OF PERCENTAGE
8%
2% CHOICES
PEOPLE (%)

YES 26 52 %

NO 19 38 %
26
52%
19 SOMEWHAT 4 8%
38%

CAN’T SAY 1 2%

TOTAL 50 100 %
YES NO SOMEWHAT CAN'T SAY

21
 Q2. Do you think demonetisation hurt the Indian economy?
O YES O NO O Somewhat O Can’t Say

RESPONSE
4 0 NO. OF PERCENTAGE
0% CHOICES
8% PEOPLE (%)

YES 21 42 %

21
42% NO 25 50 %

SOMEWHAT 4 8%

25
50%
CAN’T SAY 0 0%

TOTAL 50 100 %

YES NO SOMEWHAT CAN'T SAY

22
Q3. Do you think well connected insiders knew about demonetisation before
November 8?
O YES O NO O Somewhat O Can’t Say
RESPONSE
2
4% NO. OF PERCENTAGE
7 CHOICES
14%
PEOPLE (%)

17
34% YES 17 34 %

NO 24 48 %

SOMEWHAT 7 14 %

CAN’T SAY 2 4%
24
48% TOTAL 50 100 %
YES NO SOMEWHAT CAN'T SAY
23
Q4. Do you think demonetisation would negatively impact the ruling NDA in 2019
general elections?
O YES O NO O Somewhat O Can’t Say
RESPONSE
NO. OF PERCENTAGE
1 CHOICES
6 2% PEOPLE (%)
12%

YES 17 34 %
17
34%

NO 26 52 %

SOMEWHAT 6 12 %

CAN’T SAY 1 2%

26 TOTAL 50 100 %
52%

YES NO SOMEWHAT CAN'T SAY

24
 Q5. Is it difficult for you to get change for Rs. 2000?
O YES O NO O Somewhat O Can’t Say

RESPONSE
2 0
NO. OF PERCENTAGE
4% 0% CHOICES
PEOPLE (%)

18 YES 18 36 %
36%

NO 30 60 %

SOMEWHAT 2 4%

30
60% CAN’T SAY 0 0%

TOTAL 50 100 %
YES NO SOMEWHAT CAN'T SAY

25
 Q6. Has your use of digital modes of payment increased since demonetisation?
O YES O NO O Somewhat O Can’t Say

RESPONSE
0
0% NO. OF PERCENTAGE
9 CHOICES
18% PEOPLE (%)

YES 38 76 %
3
6%
NO 3 6%

SOMEWHAT 9 18 %

CAN’T SAY 0 0%
38
76%
TOTAL 50 100 %
YES NO SOMEWHAT CAN'T SAY

26
 Q7. Were the poor more affected because of demonetisation than the middle class?
O YES O NO O Somewhat O Can’t Say

RESPONSE
2
NO. OF PERCENTAGE
6
4% CHOICES
12%
PEOPLE (%)

YES 22 44 %

22
44% NO 20 40 %

SOMEWHAT 6 12 %

20 CAN’T SAY 2 4%
40%

TOTAL 50 100 %
YES NO SOMEWHAT CAN'T SAY

27
 Q8. Do you think people in rural India became aware of digital world and started using
payment applications?
O YES O NO O Somewhat O Can’t Say
RESPONSE
2 NO. OF PERCENTAGE
4% CHOICES
PEOPLE (%)
8
16%
YES 24 48 %

NO 16 32 %
24
48%
SOMEWHAT 8 16 %

CAN’T SAY 2 4%
16
32%
TOTAL 50 100 %

YES NO SOMEWHAT CAN'T SAY

28
Q9. Has demonetisation further led to shrinking of job market?
O YES O NO O Somewhat O Can’t Say

RESPONSE NO. OF PERCENTAGE

4 CHOICES
8% PEOPLE (%)

7
14% YES 19 38 %
19
38%
NO 20 40 %

SOMEWHAT 7 14 %

CAN’T SAY 4 8%

20
40% TOTAL 50 100 %
YES NO SOMEWHAT CAN'T SAY

29
 Q10. Do you think demonetisation will have a positive impact on our economy in
the long run?
O YES O NO O Somewhat O Can’t Say

RESPONSE NO. OF PERCENTAGE

0 CHOICES
0%
PEOPLE (%)
10
20%
YES 35 70 %

NO 5 10 %

5
10% SOMEWHAT 10 20 %

CAN’T SAY 0 0%
35
70%
TOTAL 50 100 %

YES NO SOMEWHAT CAN'T SAY

30
 OBSERVATIONS & FINDINGS
Results and findings of the data research was that almost every person agreed that there
were people in India who were the holder of black money that is unaccounted money
and money earned by illegal means which is obviously unrecorded and unaccounted.
Demonetization is just a part of process of tackling and removing the black money in the
form of currency and to hit the roots of fake currency. Almost every person was facing
cash crunch and inconvenience during the phase of those 50 days of demonetization but
many of them accepted the fact of demonetization was necessary to fight against the
determinants which were impacting negatively on the Indian economy.
People were ready to stand in lines before banks and ATMs to deposit and exchange their
old notes for the withdrawal of new currency notes. No matter how long they have to
stand, they had the feeling to contribute in the surgical strike against the black money,
corruption, inflation and counterfeit notes for the betterment of India. Digitalization
has ignited them to opt for the digital payment modes and make cashless society.
Most of the respondents agreed and admired the demonetization move of the Modi
government as a risk taking move but considering the risks aside, the move was much
needed for the fight against money laundering, terror funding, parallel economy,
hyperinflation, though in the long run, but resulted into betterment of the each individual
citizen of the nation.
31
STUDENT’S OWN VIEW
Demonetisation had been praised as well as criticised on various grounds. There
had been a lot of opposition regarding the implementation of this policy. The
move was an effort to handle the threat of illegal money, corruption, terror
funding and counterfeit currency. The decision regarding demonetising the old
currency was considered as a surgical strike against the undeclared money in the
history of an Indian Economy which may be a move towards the cashless
economy. The demonetisation was followed by a liquidity crunch in the country;
banks and ATMs across the country faced severe cash shortages with detrimental
effects on various small business, agriculture and transportation. Currency ban
by the government of India created chaos in short-term as most of the people
with old currency notes faced difficulties in exchanging them in long queues
outside banks and ATMs across India. The total value of old currency notes in the
circulation was to the tune of Rs.14.2 trillion, which constitute about 86% of the
total value in circulation. The black money had either been accounted by paying
heavy taxes and penalties or reached the bank accounts through direct or
indirect channels. Demonetization had brought a positive impact on Indian
economy as it encouraged the digital mode of payment like E-wallets and apps,
online transactions using E-banking, usage of plastic money etc. Demonetization
is beneficial for the economy in the medium to long-term.
32
 CONCLUSION
The move by the government to demonetise old currency and replacing it
with the new ones has taken the country by surprise. This definitely could
be termed as one of the boldest move of any government in the world to
curb black money significantly. With the black money almost getting reset
to zero, it is a huge benefit to the Indian economy. Another benefit is that
the fake notes now are significantly lower, as most of them were in form of
Rs.500 and Rs.1000 notes. With almost 84% of cash vanishing from the
system, and the sudden loss of purchasing power, we saw the economy
slowing down a bit for sometime. We even saw our markets correcting
because of the reduction in consumption which was primarily driving the
earnings. But, overall there have been huge structural benefits to the Indian
economy in the long run. We have a more organized and efficient economy
with less black money. Most importantly, Indians` mind-set have shifted
towards honesty, financial savings & capital markets away from corruption,
excessive real estate (unproductive) and gold ( a big drain on our forex
reserves).
33
 BIBLIOGRAPHY
 Teacher’s Guidelines
 http://home.iitk.ac.in/~rakeshj/report3.pdf
 http://www.newindianexpress.com/specials/2017/nov/08/one-year-
since-note-ban-a-report-card-from-the-people-over-50-see-
demonetisation-favourably-1695033.html
 https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetisation
 https://www.investopedia.com › Insights › Politics & Money
 https://timesofindia.indiatimes.com/topic/Demonetisation
 http://www.mbauniverse.com/group-discussion/topic/business-
economy/demonetisation
 https://www.oecd.org/cleangovbiz/Integrity-Forum-2017-Beyes-
Bhattacharya-India-demonetisation-drive.pdf
 https://www.freepressjournal.in/featured-blog/indias-history-with-
demonetisation-from-1946-to-2016/988212
 https://www.youtube.com/watch?v=rn64Vf6GEoo
34