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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