Page 1 of 11
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
I SSN: 2395-0463
Vol ume 03 I s s ue 04
Ma rc h 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 13
Demonetisation in India: Its Objectives and Effects on
Indian Economy
SHOWKAT AHMAD WANI
Research Scholar at School of Economics DAVV Indore (M.P) India
Email-showkatwani45@gmail.com
Abstract
Demonetization of currency is a
radical monetary step in which a
currency unit’s status as a legal tender
is declared invalid. This is usually
done whenever there is a change of
national currency, replacing the old
unit with a new one. The present
study is an attempt to know about the
Demonization in India and its
objectives and effects. The purpose
of the present study also elucidates
the impact of such a move on black
money.
Keywords: Demonetization,
Objectives, Effects, Impact, Black
Money.
INTRODUCTION
When a currency note of a particular
denomination ceases to be a legal
tender, it is termed as
Demonetization. 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. Such a step for
example was taken when the
European Monetary Union Nations in
2002 decided to adopt euro as their
currency. However the old currencies
were allowed to convert into Euros
for a period of time in order to ensure
a smooth transition through
demonetization. In 2015 the
Zimbabwean government
demonetized its dollar as a way to
combat the country’s hyperinflation,
which was recorded at 231,000,000%.
The three month process involved
expunging the Zimbabwean dollar
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I SSN: 2395-0463
Vol ume 03 I s s ue 04
Ma rc h 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 14
from the country’s financial system
and solidifying the U.S dollar, the
Botswana pula and the South African
rand as the country’s legal tender in a
bid to stabilize the economy. Fiji,
Singapore and Philippines were other
countries to have opted for currency
demonetization.
Review of Literature
Rahul Prakash Deodhar (2016)
“Black Money and Demonetisation”
The Government of India announced
that the Rs 500 and Rs. 1000
denominated currency notes will
cease to be legal tender. The move
was targeted towards tackling black
money, corruption and terrorism.
After initial euphoria, questions began
to emerge. What are the costs of this
demonetization? Will it be effective if
people can still create new black
money thereafter? The author
concluded that it is just one move of
one piece in the chess board of black
money. To check-mate the black
money king, you have to win the
board. There are various steps
required as detailed above.
Government can play all these moves
and still fail if they play improperly.
All we can say is that Government is
playing well. But will it succeed? The
efforts will bring massive amounts of
cash into the banking system – a
benefit in itself. Once the money is in
the legitimate channels, it should be
better utilized and revenue will be
generated from its use. If that is
success enough then yes.
Dr Pratap Singh & Virender Singh
(2016) “Impact of Demonetization on
Indian Economy” India has amongst
the highest level of currencies in
circulation at 12.1% of GDP. Cash on
hand is an estimated at around 3.2%
of household assets, higher than
investment in equities, or roughly
around $ 220 billion. Of this cash,
87% is in the form of Rs 500 and Rs
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Available at
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I SSN: 2395-0463
Vol ume 03 I s s ue 04
Ma rc h 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 15
1,000 notes or roughly Rs 14 lakh
crore ($190 billion).A significant
portion of the household cash on hand
is generated by economic transactions
that are not reported to tax authorities
or generated through corruption.
Scrapping the higher denomination
money would either result in these
being brought into the system or the
money just disappearing. The study
highlights the probable consequences
of this decision on various economic
variables and entities. The author
concluded that if the money
disappears, as some hoarders would
not like to be seen with their cash pile,
the economy will not benefit. On the
other hand if the money finds its way
in the economy it could have a
meaningful impact. However
experiences from different countries
shows that the move was one of the
series that failed to fix a debt- burdened and inflation-ridden
economy.
Objectives of the Study
To study the
Demonetization Policy in
Indian economy.
To study the various
objectives and effects of the
Demonetisation in India.
Research Methodology
Keeping in view of the objectives,
in the present study secondary data
has been used. Data has been
collected from various research
papers, magazines and articles. In
addition to this study, data have also
been collected from various journals,
economic and political weekly and the
research is also based on the referred
sources- published, unpublished and
electronic.
Demonetisation in India
Demonetization for us means
that Reserve Bank of India has
withdrawn the old Rs 500 and Rs
1000 notes as an official mode of
payment. Demonetization is the act of
