Page 1 of 10
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 08
July 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 296
A study on impact of demonetization on various sectors and
people in India
Anshu Ahuja
Research scholar, department of commerce, Maharshi Dayanand University, Rohtak
Abstract:
The act of removing a currency unit of its
status as legal tender is known as
demonetization. There can be various
reasons to demonetize the nation currency
like to rebuff inflation, rebuff black money
and corruption and also to discourage a
cash system. There can be two ways to
complete the process of demonetization.
First of which can be done by introducing
new notes of the same currency and the
second can be done by completely
substituting the old currency with new
currency. So to tackle with the problem of
black money and to enhance cashless digital
economy, Prime Minister of India acquired
a huge step of demonetization on 08
November 2016. One of the major aims of
demonetization was to control the terror
financing also. As per the one report of
Reserve Bank of India, 17742 bn (13% of
GDP) value of notes were in circulation and
out of which 15347 bn values of notes were
of 500/1000 RS notes which were 11% of
GDP and 86.5% of total notes as on 4
November 2016.. According to one of the
report of RBI Rs. 12.44 lac crore had been
deposited by the people till 10 December
2016. Within fifteen days half of the
circulated money had been collected by the
banks also. The possible consequences of
this decision will be presented by the
researcher on various economic variables
and common people. Also
Keywords- Demonetization, Cashless
Transactions, currency, ATM’s
Introduction:
The act of removing a currency unit from
its status as legal tender is known as
demonetization. There can be various
reasons to demonetize the nation currency
like to rebuff inflation, rebuff black money
and corruption and also to discourage a cash
system. There can be two ways to complete
the process of demonetization. First of
which can be done by introducing new notes
of the same currency and the second can be
done by completely substituting the old
currency with new currency. So to tackle
with the problem of black money and to
enhance cashless digital economy, Prime
Minister of India acquired a huge step of
demonetization on 08 November 2016. The
currency was demonetized in India by
honorable president Narendra Modi and it
was the third time when Indian currency
demonetizes. For the advancement and
improvement of Indian Economy it was the
bold step taken up by prime minister. On the
other hand, Remonetization is reverse
condition of it. In remonetization a currency
Page 2 of 10
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 08
July 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 297
type is restore in the country by legal tender.
For the adoption of gold standard, in 1873
according to coinage act, silver was
demonetize. But due to such withdrawal
there was continuously decline in the money
supply concluded towards 5 year economic
depression nationwide. So to overcome from
this problem and due to opposition of
farmers as well as coal miners, in 1878
silver was reintroduced in the form of
Bland-Allison act.
Reasons of step toward demonetization:
• To enhance the Cashless economy in India
• To remove the fake currency in India
• To remove the black money in India
• To resist the corruption in India
• To remove the inflation in India
• To eradicate the terrorism and Naxalism
History of demonetization in India: The
first currency ban in India was made in India
in 1946. The currency notes of 1000 and
10000 rupees were removed by the
government from circulation. But due to less
accessible to common people of such higher
denomination currency there was no impact
of such demonetization really. However,
with an one more additional currency of
5000 rupees these notes were reintroduced
in 1954. Again second time in 1978 Prime
Minister Morarji Desai announced the ban
on currency of 1000, 5000 and 10000 rupees
notes. The main aim of this announcement
was to remove and curb the black money in
India. And now it was the third time when
demonetization took place in India. The
prime minister of India sh. Narendera Modi
as well as Indian government by taking a
huge step decided on November 8, 2016 to
demonetize the two big denomination notes
of Rupees 500 and 1000. On this day of
great decision 86% of the total cash
circulation was of notes of Rupees 500 and
1000. This announcement was made by our
Honorable Prime Minister Shri Narendera
Modi in live television on November 8,
2016 that the notes having Mahatma Gandhi
series with denomination of Rupees 500
and 1000 would be terminated after the
midnight of November 8, 2016 and stated as
well that as per the legal tender these notes
will be exchanged with new currency notes
of Rupees 500 and 2000 denomination.
However, the Indian government also made
clear that the notes with denomination of
Rupees 100, 50, 20, 10 and 5 having
Mahatma Gandhi series as well as notes of
Rupees 2 and 1 will not be affected by this
announced policy and they will be remain
judicial .The government also declared that
the purpose behind this great move is to
eradicate the illegal and fake of nation’s
existing currency which can be termed as
black money. The other purpose of this
move was to effort to reprisal on corruption,
drugs usage as well as smuggling. Many
international personalities as well as
common people also gave their support in
this great movement. But many opposition
parties criticized this tragic demonetization
move of existing central government in both
houses of parliament. Some protests are also
Page 3 of 10
Journal for Studies in Management and Planning
Available at http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 08
July 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 298
notified at some places in India against the
demonetization move of the present
government.
Source: http://www.gpedia.com/en/gpedia/Indian_500_and_1000_rupee_note_demonetisation
Chart 1: Rs 500 and Rs 1000 Notes: From
25% to 85% of Cash Economy in India
History of demonetization in world:
demonetization has also take place in many
countries of world also. In 1971 Britain also
stopped circulation of old currency notes
and bought coins of 5 and 10. First in 1982,
to remove the tax evasion and corruption
Ghana got rid of its 50 cedi notes. But this
movement made an adverse impact on
people due to losing faith of public in
banking system. In 1984, with the aim to
remove corruption in Nigeria new currency
notes were issued by Muhammadu Buhari
but the aim to remove the inflated and debts
ridden economy could not achieve. In 1987,
Myanmar’s military also refuted the 80% of
currency. In 1991, soviet union also
removed 50and 100 ruble notes. So many
countries adopted the step of
demonetization.
Review of literature:
Palanisamy, S.,and Sabariga, E. (2017)
reviewed a study on comparative study on
demonetization. On the basis of their study
they concluded that there are many negative
impact of demonetization in short run like
decline in the GDP, many adverse affect on
agriculture and industry sector due to job
loss because unemployment was the main
problem from which many people had to
suffer due to demonetization. Also the small
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