Effect of Demonetization

Dr. Tushar Chaudhari,Assistant professor,

Seth Kesarimal Porwal College, Kamptee

OVERVIEW

Demonetization

History Reasons Positive impact Pitfall Analysis Conclusion

DEMONETIZATION

Demonetization is the act of stripping a currency unit of its status as legal tender

It is the process of ceasing to produce and circulate particular forms of currency

COUNTRIES WHO HAVE DONE THIS BEFORE

GHANA ZIMBAWE AUSTRALIA NEWZEALAND USA EUROPIAN UNION SINGAPORE NORWAY UK INDIA

GLOBAL CONTEXT

FRANCE

History

INDIAN CONTEXT

14th Centu

ry

INDIAN CONTEXT

12th January 1946

INDIAN CONTEXT

16th January 1978

INDIAN CONTEXT

8th November

2016

Pradhan Mantri Jan Dhan Yojana(25.98cr Bank accounts)

Income Declaration Scheme(Rs.65,250cr disclosed)

Demonetization

REASONS FOR DEMONETIZATION

Black money

Fake currenc

y

Boost saving

and deposit

Reduce money lending rates

REASONS FOR DEMONETIZATION

Cash less transaction

Revenue for government

project

REASONS FOR DEMONETIZATION

Politically motivated

Reduce NPA of

nationalized bank

Impact

POSITIVE IMPACT (SOCIAL)

Moist Hit

stone-pelting in

J&KCorrupts

burning cash

POSITIVE IMPACT (ECONOMIC)

record recoveries of house tax

Electricity companies making huge record

recoveries

Huge opportunities for mobile wallets

Property prices come down by 25%

PITFALLS

STRUCTURAL

unpreparedness

Information may have leaked

insufficient infrastructure

Root of the problem is untouched

ATM were not in coordination with new

currency.

OTHER

Future Planning by marketers

Lots of chaos

trouble in arranging family

programs Economic activity

takes bearing

BLACK MONEY Only 3 % to 7 % of black money is in form of

cash. 11.55 lakh crore have been deposited just

before demonetization day. It was estimated that 70 lac crore black

money will be recovered but only 4 lac crore has been recovered. (0.5% of GDP)

Others form of black money in terms of real estate, gold, politician money, deposit in foreign bank are still not been evaluated.

CORRUPTED MONEY AND TERRORISM Public servant will not face enquiry

without prior permission of government.(anti Grift Law)

Diluting FCRA Act. Participatory notes Fake currency :- no data have been

published yet.

DIGITIZATION Demonetization and digitalization are

separate concept. Not enough infrastructure for digitization POS machine have been imported from

china. Maximum ATM & Debit card are in with

foreign collaboration, hence profit will go to foreign company.

ATM were not in tune with new currency.

ECONOMY TOTAL EXPENDITURE (1,28,440 CRORE)

61,500

15,000

16,800

35,140

Rs. in Crore

Cost to en-terprise Cost of people queing up Cost to center, RBI cost to bank

INDUSTRY

Small business, Entertainment , luxury items

• Has come down

• Hard time to cope

Bank

• Suffer lot of problems

• Deposited with RBI1.5 Crore

• Rate of deposit come down

• Defaultation increases

FDI

• Will likely to increase

E-commerce

• Most increased

SOCIAL IMPACT Job Loss Construction workers MNERGA hires falls by 23% Toll Tax loss 1,238 Crore Death issues