Demonetisation Driven Organisations: An Overview on

Dimensions and Dilemmas of Indian Job Market .

Dr. G.RAMESH, Assistant Professor of Commerce, Sir Theagaraya College,
Chennai-600021 &

Dr.G.VIJAYAKUMAR, Assistant Professor of Commerce, Sir Theagaraya College,

Chennai-600021

ABSTRACT

While the intention of demonetisation of high value bank currency was to curb
circulation of black money and counterfeit currency, the manner of its
announcement on November 8, 2016 and methodology of execution in India has
produced mixed reactions from various quarters. No big initiative, no matter how
much important it is, happens and proceeds in India without challenges. As per
government projections, about 97% of demonetised currency notes have been
back to banks before December 2016 deadline with an estimated value of
Rs.14.97 trillion. A key outcome of demonetisation is that the move has created
a fear amongst the tax evaders in both direct taxation and indirect taxation. On
economic side, Q 3 and Q 4 of the current financial year are already affected by
note ban decision. Mounting scarcity of cash brought a halt to acceleration in the
progress of many industries and growth sectors. Construction industry, a high
density employment area is also adversely affected by after demonetisation. It is
estimated that post demonetisation sale of house properties has come down by
45% and the construction sector suffered a loss of Rs.22600 crores during the
quarter October- December 2016. Credit to small and medium industries is
reportedly down and badly affected post demonetisation. But for demonetisation,
December to March is a busy period for agricultural activities in many states for
harvesting and sowing for which there is a huge demand for finance. Workplaces
are increasingly vulnerable to the developments of the scenario of post
demonetisation Indian economy. Employees working even in great organisations
are feeling insecure and there emerged a psychological pressure on their future.
There is an apparent apprehension among employees from top to bottom of
Corporate India; most of the workforce look not to switch jobs and prefer to stay
in their current jobs amid a cautious sentiment induced by note ban. The impact
of demonetisation on the India Inc. cannot be an immediate black or white. Given
the size and nature of Corporate India, a press of button solution to the
challenges posed by demonetisation is not an easy task. The governments
policy is to be supplemented by series of measures- be it creating demand in the
economy, ease of doing business, kick-start investment cycle and creating jobs
for millions of youngsters entering workforce every year. The present paper
attempts to study the impact of demonetisation on various sectors of Indian
economy by encompassing the effect of currency ban on job market in India.
 Overall development of a country is reflected through the growth status of
its people in education, economic conditions and social well being. These are
the times of transition in Indian economy and a beginning on the path of reforms
and industrial growth is made. The present Government introduces a series of
new initiatives like Make in India and Smart cities for boosting investment. The
fourth industrial revolution is started and increased the competitiveness of
enterprises and major business operations are likely to be automated almost in
all industries. The nature and approach of many businesses have changed; so
the way of doing business and work patterns cannot remain the same as they
used to be in the last decade. With a population of 125 crores and more than
65% of the population is 35 years of age, there is no guarantee that Indias
young workforce, being highest in the World, could match the skills needed to
perform the newly created jobs. Today Corporate India is undergoing acute skill
shortage facing a big challenge in getting the right talent from unskilled youth.
Presently, staying relevant has become priority mantra not only to new job
seekers but also to the existing workforce. No doubt, reforms in Indian economy
will bring good investment to industry, it is to be seen how the new policy
measures are going to affect the millions of workforce. It is in this background,
the Government of India made a very bold move on November 8, 2016-
Demonetisation. While the intention of withdrawing high value bank currency
was to curb circulation of black money and counterfeit currency, the manner of
announcement and methodology of execution has produced mixed reactions
from various quarters. No big initiative, no matter how much important it is,
happens and proceeds in India without challenges. In a big democracy like ours,
people differ with each other in economic status and needs, the success of
economic reforms depend upon many factors and there are so many bottlenecks
from politics to bureaucracy.

Demonetisation: Some Reality Bytes

Demonetisation is an economic act of retiring a currency and replacing it
with a new currency. Stripping the currency of its legal value as a tender and
introducing a new currency in the same value or the other is referred as
demonetisation. Different countries use demonetisation technique for various
reasons; from combating corruption to controlling inflation. Nations of European
Monetary Unions adopted this technique in 2002 to switch to Euro. The
Zimbabwean government demonetised its dollar in 2015 for controlling the rising
inflation and for stabilising the economy. In both the cases change took place in
smooth manner and the old currencies remained convertible into new currencies
for a considerable period.

On November 8, 2016 our Prime Minister announced demonetisation of the

countrys the then high value bank notes Rs. 500 and Rs. 1000 which together
accounted for 86% of total currency in India. The primary intentions of retiring
the erstwhile two big value bank notes were to eliminate black money and
corruption in India. The note ban was also aimed at eradicating counterfeit
currency mainly of Rs.500 denomination generated locally and abroad. The
government planned to promote digital economy and cashless transactions by
bringing them into banked and taxable portion of nations economy.

The demonetisation bombshell of the government was followed by few

quotes from the Prime Minister there would be temporary hardship, help me
for fifty days and short term pain and long term gain. The government
imposed a series of regulations for deposit of banned notes into bank and
withdrawal of cash from banks. Initially, the daily withdrawal limit from the banks
was Rs. 2000, then increased to Rs.4500 and in third week of January,2017 it was
fixed at Rs.10000 subject to a weekly ceiling of Rs.24000. Deposits of more than
Rs. 250000 will attract tax it was told. Exchange of demonetised bank currency
was started with a daily limit of Rs.4000, followed by introduction of indelible ink
mark and finally disallowing the exchange of currency at all. During the period of
deadline for old currency, the narratives changed frequently and rules were
modified as much as 62 times. Still corrections are suggested by think tanks. The
Government passed an ordinance for punishment for having the illicit currency
after March 31, 2017.

As per government projections, about 97% of demonetised currency notes

have been back to banks before December 2016 deadline with an estimated
value of Rs.14.97 trillion. A key outcome of demonetisation is that the move has
created a fear amongst the tax evaders in both direct taxation and indirect
taxation. The report card issued by the central government at end of December
deadline , a total of 581 raids were carried out by various tax authorities which
recovered over 2900 crores of currency. During the period of deadline, there was
a 6% increase in customs duty collection and 43.3% rise in the central excise
duty collection. Direct tax collection went up by 14.4%, an increase of 26.6%
reported in indirect taxes and service tax revenue rises by 25%. In total, tax
revenue has seen higher figures and there was a tremendous increase in digital
transactions.

Considering that banned currencies was in wide circulation, uncertainty in

banking system and confusion in taxation is still continue to affect the countrys
economy. Undoubtedly, bankers are facing extreme pressures of crush crunch
normalcy would return only after only few more months. The tsunami of
Demonetisation, which enjoyed the initial public support for its intention to bring
out black money, now losing its shine. Increased cash crunch and long queues in
front of ATMs have tested and lowered the patience of public at large. Despite
the government, RBI and currency presses working overtime ATMs across the
country remain shuttered or run dry very quickly as they are functioning at less
than half their capacity. As of third week of January 2017, only 40% of more than
200000 ATMs are estimated operational in the country without No Cash or out
of service boards. As per estimates only 50% of currency sucked out of system
has been introduced as new currency. Hence, there is a severe mismatch
between demand for currency and supply of cash from central bank. Printing and
issue must equate a fair percentage of void currency to ensure monetary
liquidity for the general public. Due to prevailing cash crisis and aggravating
problem of exchangeability for consumption, the common man started to feel a
sense of uncertainty and brands demonetisation as a rushed decision
undercooked in many ways; a move not well thought from many angles.
Demonetisation is Immoral, awful act, theft of peoples property without even
the pretense of due process quoted Steve Forbes, Chairman and Editor-in Chief
of Forbes Media.1 But you cannot unscramble a scrambled egg.

On economic side, Q 3 and Q 4 of the current financial year are already

affected by note ban decision. Mounting scarcity of cash brought a halt to
acceleration in the progress of many industries and growth sectors. In spite of
RBIs latest announcement of enhancing withdrawal limit of current accounts
from Rs. 50000 to Rs.100000; a new policy guideline has emerged in the country
for cash management. With the existing poor health of banks, the Government of
India decided to waive off 660.5 cores of interest on short term crop loans
sanctioned to farmers. Industrial credit slowed across sub-sectors with loans to
small and medium enterprises reporting biggest fall. It is estimated that during
the Q 3 and Q 4 of current fiscal credit to large industries was down by 2.3% on
year to year basis. Credit growth to service sector decelerated to 7.1% in
November 2016 from 9.3% in the previous month. Clearly, business trends in
sectors like infrastructure, construction, retail, healthcare and others which had
their last point transactions in cash are getting redefined. Most of these sectors
will see a fall in employment due to demonetisation with companies cutting
down contractual jobs said Madan Sabnavis, Chief Economist at CARE ratings. 2
Although, many credit rating agencies predict India to remain one of the fastest
growing economies in the world in 2017, Manmohan Singh, Former Prime
Minister and Economist termed Demonetisation is monumental mismanagement,
disastrous; it hurts the country but the worst is yet to come. 3 Demonetisation
tsunami has negatively impacted most industries; it will take a minimum of six
months to recover the business loss of first two months after demonetisation.

Indian economists largely differ on the impact of demonetisation on

economy and corporate India both in short term and in long turn. Noted Nobel
Laureate Amartya Sen said Demonetisation is a despotic action that has struck
at the root of economy on trust. 4 He felt the demonetisation decision was taken
hurriedly without thinking about its consequences. Around 2% fall in GDP growth
in fiscal 2017-2018 is anticipated in the earlier GDP estimation of 7.6%. In
January 2017, the World Bank decelerated the Indias GDP growth for the fiscal
2016-2017 from its previous estimate of 7.6% to 7% quoting the effect of note
ban. The World Economic Outlook Update released by International Monetary
Fund (IMF) a few days later, projected a cut in the growth rate for India at 6.6%
from its own earlier forecast at 7.6%. The IMF also estimated growth rates of
7.2% in 2017 and 7.7% in 2018. As per the update, the Indian economy is likely
to revive and get back to its original estimate only in 2018. The adjustment and
recovery period could stretch to 2-3 quarters for certain sectors with a likely
pickup in the second half of 2017.
 Informal sector accounts for roughly 45% of GDP and 80% employment in
India. Agriculture is already seriously affected by drought, flood and water
sharing problems in many states. Adequate finance at right time is a
prerequisite for farming. But for demonetisation, December to March is a busy
period for farmers in many states for harvesting and sowing for which there is a
huge demand for finance. Rural economy is cash based and Indian farmers have
limited access to ATMs and online transactions. Transport, Marketing and sale of
agricultural produce are dominantly cash dependent activities. Paucity of funds
will lead to lack of manures, shortage of fertilisers and delayed payment to
labourers which will ultimately end with poor yield. There are news of farmers in
Andhra Pradesh and Tamil Nadu committing suicides due to crop failures and
pressures of repayment of bank loan. Banks are not in good condition with
crunch added to existing NPA issues; the co operative banks which are the main
source of finance to agriculture are not able to give enough funds to farmers
operations. Post demonetisation led to an implosion of agriculture trade in the
country by damaging farming activities and hitting the farmers. In January 2017,
the RBI instructed the banks to divert 40% of their currency to villages. However
the long term impact of currency crackdown on Indias agriculture economy is
yet to be known.

Construction industry, a high density employment area is also adversely

affected by after demonetisation. Sizeable amount of black money was in
circulation in reality sector; and more specifically such money is not in the form
cash. It is estimated that post demonetisation sale of house properties has come
down by 45% and the construction sector suffered a loss of Rs.22600 crores
during the quarter October- December 2016. As consumers stopped booking new
villas and earlier agreements have slowed down, almost every builder postponed
the new projects. Both trade and major operations in construction essentially
involves huge currency , transformation to digital transactions and electronic
payment are long term processes given the nature and number of activities
involved in this industry. A considerable number of migrant labourers are
employed in construction activities that do have adequate access to banks,
lacking behind on the use of ATMs, plastic money and net banking. As a majority
of these workers are paid daily and weekly wages, it has become a challenge for
construction companies to attract, to pay and to retain them.

In the manufacturing sector, availability of adequate credit to large

industries hit a new low during the quarter November 2016- January 2017. Credit
to small and medium industries is reportedly down and badly affected post
demonetisation. While banks have lowered interest rates on loans, the benefits
are yet to reach the industry. As banks are flush with funds after currency ban,
the entrepreneurs in MSME (Micro, Small and Medium Enterprises) sector expect
the government should walk the talk by deploying part of the money to the
sector to compensate losses on demonetisation and propel growth. The retail
market, the countrys largest source of employment after agriculture and
construction, still unable to adapt to the crackdown. This economic rich industry
has a deep penetration into rural India and contributes 15% of the GDP.
Demonetisation created big challenges to retailers as there are hurdles in
tendering changes to customers for new Rs.2000 bank notes. Their businesses
are too small and transactions are of too little value for making digital payments
and for installation of POS machines. As majority of customers in retail shops, are
not accustomed plastic money, retailers are extending credit to customers which
in turn affects their own finance circulation incurring colossal losses.

Note Ban effect on HR:

When demonetisation policy was conceived in India, the key sectors of
manufacturing, construction and Information Technology showed a dip in job
creation. Data released by Labour Bureaus revamped Survey showed a dip of
16000 jobs in IT-BPO sector, 23000 job losses in construction sector and
surprisingly 12000 manufacturing job losses during the period July-September
2016. The global situation stacked with uncertainty with Indias leading export
market for professionals USA went for election. During the campaign President
Donald Trump had a slogan on anti-outsourcing and assailed the skilled worker
visa program( H-1B). His inaugural speech after assuming office highlights that
the country would follow two simple rules; buy American and hire American.
The Indian IT industry saw dip in employment even in July 2016-2017. the
decline in the IT sector is unexpected and could be due to a pause in business
coming in from the U.S said Pronab Sen., a former Chairman of the National
Statistical Commission.5 Internally, the economic situation was fairly balanced
with attempts to passage of GST bill, change of RBI governor and control on
inflation. There were indications of consumption led growth and few sectors were
taking a positive shape projecting an economic growth in 2017. Domestic
companies have started to look at artificial intelligence and automation has
started to pickup in majority of their operations. The fourth industrial revolution
is characterised by a fusion of technologies that is blurring the lines between
physical, digital and biological spheres, a new world is emerging before our eyes,
fundamentally different from the old said Mukesh Ambani, CMD, Reliance
Industries.6 Robots operation in automobile and other industries, Driver less cars
and robo finance in banks are some of the emerging trends which will have the
potential to completely replace conventional human based jobs. As per central
governments annual Employment- Unemployment Survey(EUS) conducted by
Labour Ministry, the countrys unemployment rate went up to 5% in 2015-2016,
its highest in the last five years. When there is an estimated 20 plus crores
Indians could be jobless or underemployed in 2025 due to improved technology
and automation, demonetisation has wider and deeper ramification on the
workforce all over the country.

Workplaces are increasingly vulnerable to the developments of the

scenario of post demonetisation Indian economy. Employees working even in
great organisations are feeling insecure and there emerged a psychological
pressure on their future. There is an apparent apprehension among employees
from top to bottom of Corporate India; most of the workforce look not to switch
jobs and prefer to stay in their current jobs amid a cautious sentiment induced
by note ban. The job opportunities is very low in the quarter followed the
demonetisation and expected to be lower for few more months. Due to reduced
bargaining and negative sentiment in the job market, attrition levels in India Inc.
pegged at 16.3% and are projected with further dip. Fresh hiring has gone down
in many companies and this is waiting and watch situation for executives at all
levels across industries. Till the negative sentiment gets over, employees hold
onto their jobs as there wont be much better compensation in other
organisations. Are the times of fat salaries, attractive perks and secured jobs
gone?

Now, it is Advantage Employers time in India. Given the fact that attrition
is coming down, retaining quality workforce may not be an issue to the
employers. As the economy gets into a better health and streamlined,
employees will be able to see what kind of jobs are in demand and to the
compensation packages for such jobs. Demonetisation has already created jobs
for more than 75000 sales professionals and engineers in mobile payment
sectors. Leading players in mobile payment and e-wallet industry have put
immediate hiring on top of their agenda. Though not possible to equate the
number of jobs lost in three months economy crack down, the emergence of new
jobs in electronic economy can help to sort out unemployment issue to a
considerable level. Acceleration of investments in technological sector can make
a significant progress in the economy in general and employment in particular.

Conclusion:
Corporate India witnessed a major shock in withdrawal of high-value currency
notes. While many experts believe the note ban as an act of impulsiveness
carried out with inadequate indulgence and poor planning. The worst of note
ban is yet to come a few opined. Whilst the purpose of the Governments move
may not be in doubt, demonetisation only cannot set right all issues of corruption
and circulation of black money, unethical mindset leads to corrupt practices.
Demonetisation is an honest attempt; not a game between two parties aimed at
winning or losing. It involves many parties- the government, industry, trade and
the public at large. As the objectives of each of these stakeholders differ and
intricacies of implementation emerge, readymade results cannot be achieved.
The impact of demonetisation on the India Inc. cannot be an immediate black or
white. Given the size and nature of Corporate India, a press of button solution
to the challenges posed by demonetisation is not an easy task. The
governments policy is to be supplemented by series of measures- be it creating
demand in the economy, ease of doing business, kick-start investment cycle and
creating jobs for millions of youngsters entering workforce every year.
Unexpected challenges erupt in todays competitive and complex business
scenario; companies have to move away from traditional techniques of
management. In order to stay healthy in the market, organisations need to re-
align and reshape the human resources towards the emerging technological
revolutions. A solid foundation in this direction by corporate India will make a
win-win situation to both employers and employees in long run. Having a positive
approach in the present tough days, can take the Indian companies to newer
and better levels on the growth trajectory.
1. Steve Forbes writes stinging editorial Express Web Desk,
indianexpress.com, December 23, 2016.
2. 77000 jobs created in July- Sept, The Hindu, Chennai, January 28, 2017.
3. Demonetisation: Manmohan Singhs full speech in Raja Sabha, The New
Indian Express, December 24, 2016.
4. Amartya Sen terms Demonetisation a despotic action, thehindu.com,
November 30, 2016.
5. 77000 jobs created in July- Sept, The Hindu, Chennai, January 28, 2017.
6. dt NEXT, The Daily Thanthi, Chennai, January 17,2017

References:
Dinamalar , Chennai, January 14, 2017.
Indias retail still unable to adapt post note ban, dt NEXT, The
Daily Thanthi, Chennai, January 17,2017
Vinayshil Gautam, Demonetisation& Tata-Mistry Cauldrons: A Push
for better governance? Business Manager, Alwar, January 1, 2017.
www.financial express.com.
www.newindianexpress.com,
Www. thehindu.com