Name: Saloni Jain
Class: 3BBA ‘A'
Register No.: 1720454
Subject: Research Methodology
CIA 1: Component 1
Submitted To: Professor Halaswamy
MAIN TOPIC: INDIAN ECONOMY
SUB TOPIC: EFFECT OF DEMONETISATION IN INDIA
Indian Economy: The economy of India is a developing mixed economy. It is the world's
seventh-largest economy by nominal GDP and the third-largest by purchasing power parity
(PPP). The country ranks 139th in per capita GDP (nominal) with $2,134 and 122nd in per capita
GDP (PPP) with $7,783 as of 2018. After 1991 economic liberalisation, India achieved 6-7%
average GDP growth annually. In FY 2015 and 2018 India's economy became the world's fastest
growing major economy, surpassing China. The long-term growth prospective of the Indian
economy is positive due to its young population, corresponding low dependency ratio, healthy
savings and investment rates, and increasing integration into the global economy. India topped
the World Bank's growth outlook for the first time in fiscal year 2015–16, during which the
economy grew 7.6%.
Effect of Demonetisation on India: On 8 November 2016, the Government of India announced
the demonetisation of all ₹500 and ₹1000 banknotes of the Mahatma Gandhi Series. The
government claimed that the action would curtail the shadow economy and crack down on the
use of illicit and counterfeit cash to fund illegal activity and terrorism. 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.
Mr. Naresh Mishra and Dr. N. Smith Thinos (January 2017) in their research paper studied
the effect of demonetisation in terms of profit or loss to the economy and the country in general.
They have used secondary data as a source of information to work on this research paper. Mainly
they have used articles and magazines as a source of secondary data. In the study report they had
tried to explain the concept of cashless economy by taking the reference of investopedia. One of
the major findings that they came across was; ‘It is not all about how much money you are
having in your wallet, you can pay by any of the bank card or banking transfer'. Following were
the areas of the research paper that showed the effect of demonetisation. Like cash rush, stock
market, transportation, agriculture, banking, business, income tax, railways etc. According to
their research findings there are no prominent figures of exact black money holding in cash but
studies and data shows that about 8% of black money is held in cash. According to the Centre for
Monitoring the Indian Economy (CMIE), the transaction cost of demonetisation until 30th
December, 2016 is estimated around Rs. 1.28 lakh crore. As per the statement released by the
deputy Governor of the Reserve Bank of India which stated that by the end of December 2016
total of 11.4 lakh crore money were deposited into the bank out of 14.4 lakh crore money. This
means that there is still 3 lakh crore money unidentified and that is why there is still a big chance
of people having black money.
Babita Singh (November 2016) had presented the research paper to show the effect of
demonetization over the retail outlets. She has used primary data to get all the information to
work on this research paper. She has used questionnaire as a source of primary data. This was
filled by the 50 shopkeepers of the area. Because of this she got some amazing information about
the retail stores. About 80% shopkeeper presented their view that from 9th November, 2016 to
10th December, 2016. All the stores that accepted old notes had a shocking 20% increase in their
profit. But after some period that sales started to decline as they had to stop taking old noted for
their own security. Because of demonetization the shopkeepers didn't had an option and that is
why they started paytm and cheques as a source of payment. Many shopkeepers had their credit
period. Top brands like HUL, P&G were affected with only decrease of 20% sales due to brand
name. Moreover on the basis of the study she had identified the effect of demonetization
category wise. Likewise, salty snacks sale decreased by 10%, chocolates sales had decreased by
50%, biscuits sales had decreased by 20%, juice/fruit drinks sales decreased by 20%, cigarettes
sales decreased by 10%, mobile phones sales decreased by 70% , gold sales increased by 70%.
She concluded her research paper by saying that even though demonetization is very painful for
many people, but it is only for a short period of time. If you see it in a long run context, it will be
very beneficial for us and because of this many people have started using paytm and other wallet
Sharmili S.J (December 2016) has presented the research on “Demonetization as a introduction
to complete financial inclement”. Understanding the importance of demonetization as a measure
of financial inclusion. Financial inclusion mainly stands for, the delivery of the financial services
at the affordable cost to the low income segments of society. As per the study and data the
financial inclusion has the power to boost both savings and credit availability. This study helped
her to know that this big move taken by the government has big long term advantages in the
future. Moreover this would help the medium to long term Current account and saving account
(CASA) ratio to improve which would mean that there is a long term benefits for our country.
Demonetization would reduce cash transaction in the real estates, which might result in decrease
in the price of estates and this would result in people to buy houses easily and cheaply. Moreover
the near future inflation will decrease due to less cash transaction.
M. Jasmine Shirley (February, 2017) has presented about the “Impact of Demonetization in
India” in her research paper. In the first part of the paper, how it had impacted the Indian
economy has been explained. As per the research, the BSE SENSEX and NIFTY 50 stock had a
fall of about 6%. Moreover on the later on days, there was a huge shortage of cash. Moreover
due to shortage of cash overall production of market had decreased. One of the biggest problems
was that banks did not had enough new currency for the exchange of the old notes, which
resulted in the breakdown the overall economic system. The first thing that happened after
demonetization was decrease in the overall consumption of commodities which results in
decrease in the export-import. Moreover there was a major impact over the domestic sectors,
reduction in the Government liability, farming and fishing industry, business, drop in industrial
output, black money, and impact over counterfeit currency, bank deposits, jewellery and real
estate, IT sector etc. Findings in this sectors says that, though demonetization is a good concept
to grab the black money holders, most of black money is kept in form of land, gold, real estate
etc. People face too much inconvenience due to improper planning about post demonetization
and for number of days they had spent their time by standing in queues and waiting to get new
currency so that they can manage their family and business.
Chabi Gupta (December 2016) had studied about the payment banks and demonetization. She
had firstly explained about the Indian banking sector. RBI is the organization which sets up the
payment banks. Small saving accounts and payment services mainly for low income household,
small businesses etc are provided by the payment banks. Secondly, she had explained the overall
impact of demonetization move made by the Indian government. According to the Reserve Bank
Of India (RBI) figures and stats, as of March 2016 currencies in circulation amounted to
Rs.16,415 billion of this 500 notes were of around 47.8% in value and 1000 were of 38.6% in
value. In total they had 86% as a joint in the Indian economy. Facilities and services like contact
less debit and credit card are being launched by Axis Bank, HDFC Bank and few more. This
system will help customers to use their card without even swiping it.
Ansari (February 2017) studied the impact of real per capita GDP, the size of overseas trade
and density of population on the tax revenue by making an inter country comparison. Data was
collected for the period Nov 2016 to February 2017 from IMF publications and World Bank
publications. On the basis of employee regression analysis the author has developed its research
paper. In the first part of the research paper, real per capita GDP and size of trade were taken as
independent variables and tax revenue as dependent variable were taken into consideration. In
the second equation population factor was also included as independent variable to assess the
impact of all three factors (GDP, size of overseas trade and density of population) on tax
revenue. The study concluded that real gross domestic product and foreign trade were positively
correlated with tax revenue.
Aarav Guru and Shameek Shenzha (2016) researchers studied and presented the research on
black money income. In his research he found out that there is a need for amendment in DTAA
& ITEA. While analyzing the black money he came to know a lot of information. There was a
large no of people having black money and the number kept on increasing as the day passed by
.The researcher also identified how black money had caused menaces in our economy and in
what ways it is used. Governor of the Reserve Bank of India which stated that by the end of
December 2016 total of 11.4 lakh crore money were deposited into the bank out of 14.4 lakh
crore money. This means that there is still 3 lakh crore money unidentified and that is why there
is still a big chance of people having black money.
Sukanta Sarkar (2017) conducted a study on the parallel economy in India: Causes, impacts &
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 i.e. Indian govt. The govt has focused on making
committees rather than trying to do something to implement those committees. In his research
paper he also stated that if the govt does not take any further step to fix this problem then they
can be in big trouble because it is not long before the people would come to know about the real
truth about the black money. The study concludes that laws should be implemented properly to
control black money in our economy. According to their research findings there are no
prominent figures of exact black money holding in cash but studies and data shows that about
8% of black money is held in cash. According to the Centre for Monitoring the Indian Economy
(CMIE), the transaction cost of demonetization until 30th December, 2016 is estimated around
Rs. 1.28 lakh crore.
Suchit Mishra (2016) in his research paper said in favor of demonetization. His main objective
was to analyze the impact of demonetization on Indian economy. This paper shows the impact of
such a move on the availability of credit, spending and level of activity and government finances.
The study is based on secondary sources of data information collected from different books,
Journals, Newspapers and relevant websites in order to make the study more effective. Data is
analyzed and put into the points that to clearly know the facts in the means of list. The study
attempts to know the effects of demonetization on common man. In his study he stated that the
common people were the most affected in this situation as they had to wait in the queue for a
very long period of time to get the new currencies. This caused a haphazard amongst the middle
class people and they started protesting against the government and their opinion about this was
in a very negative manner. In a poll conducted amongst common people, most of them were
unhappy with the decision because it was a very unsystematic decision taken by the government
of India. He also tried to found some solutions in his study.
Aishwarya Krishnan (April 2017) present a research paper on the overall effect of
demonetization. He stated that demonetization was a one step of many steps in fighting
corruption, black marketing, and financing insurgency. However preparation for demonetization
was lop-sided and its impacts were terrible on Indian public. If 86% of cash is taken out, with a
meager amount available, all market transactions have been killed. The people, who were
targeted, did not come on streets, but common folk are out from their work places as well as
homes. , Somebody put a parable on social net. For killing ten crocodiles, government pumped
out all water from the pond results killing ten thousand fish in pond but Crocodiles walked off on
dry sand. With an intention to rid the country of black money and dig out tax defaulters and
black money holders, government has taken step to demonetized Rs 500 and Rs 1000 notes. This
move will have major impact on the parallel economy but sudden announcement and failure to
prepare in advance has created temporary chaos and discomfort among the general public.
Common Men were finding it difficult to buy with no money in pocket, wasting hours in queues
which although could have been avoided if planned in advance. He pointed out all the pros and
cons of this big decision.
1. This study covers only few banks of the rural city, which may not provide the complete
picture of the effect of demonetization over banking sector.
2. Moreover demonetization is the very latest topic to study, due to that not enough research
papers are available in this sector to study.
3. Some respondent's didn't show the interest to fill the questioner.
4. Moreover this topic requires a very depth research whereas here only 100 respondents
have taken so it may not enough for this study.
5. Not all mobile payment applications have been mentioned in this research.
6. This study has the inherent limitations added to it by itself as it does not have
adequate research being carried out on the phenomenon of demonetization.
7. There is no sufficient review of literature available for the inferences to be made through
an exhaustive reference.
8. All the data are already available but this article have them consolidated and organized
them in a factual method and order for a clear understanding and study.
9. Time is also a constraint. As this includes a huge amount of data handling due to its
macro economical nature and the availability of the raw data from the valid sources are
also crucial in this study.
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