Encroachment of demonetization on Indian economy and commons human race

By

Anil Jain
(Associate Professor, FMS, PAHER University, Udaipur)

Apurva Sarupria
(PAHER University, Udaipur)

Abstract

The primary thought process behind demonetization was to completely wash out the load of black money
and fake currency from the economy and diminishing the use of phony cash, which was flowed into the
Indian economy by our hostile neighbor with the target of ruining our growing economy and spreading
terrorism. But one must remember that India is a money exchange based economy and so by expelling
86% currency with immediate effect has hugely crushed the economy of our fast growing nation.
Demonetization of Rs 500 & 1000 notes will not be able to accomplish the soul goal of disintegrating
dark cash from the Indian economy as there are other setbacks i.e interest in land, Money financing to
race parties with no legitimate records & so forth which are hindering the said objective. These kinds of
dark cash should be observed appropriately and managed by the government strictly to achieve the best
result of demonetization. According to the gauges by the few financial specialists almost 90 % of the
aggregate trade outflow has seen a major downfall, and subsequently the expressed reason for
demonetization which was to stifle dark cash and empower RBI by bringing down its liabilities is not
achieved. Yet false representation has been given by the administration of tremendous profits & great
results of demonetization. RBI and the other hold bank supported demonetization, but other agencies like
CSO and FMO predicted that exercising demonetization in the midst of the quarter will bring a stoppage
to the fast growing Indian economy. Adverse effects of demonetization can be seen on new business
opening, lesser availability of Investment funds, reduction in employment generation and so forth.

Keywords : economy, money, notes, development, demonetization

INTRODUCTION

India has surprising conceivable outcomes to end up noticeably a noteworthy power in the worldwide
market. In spite of the fact that India is a creating economy, regardless of that its economy had assumed a
noteworthy part on worldwide exchanging. India stands amongst the most favored goal for speculators as
it has a good business condition, appealing outside approaches and talented workforce. Earlier year was
brimming with astonishments and curiosity for the Indian Economy by the announcement of
demonetization. As the term demonetization is well-known to the Indian economy. In 1938 and again in
1954 the RBI had printed the note with most elevated section of Rs 10000 yet these notes were
demonetized in Jan 1946 and again in 1978 as indicated by RBI.

Again on eighth November 2016 Indian Prime Minister had settled on a notable choice and reported to
demonetized the paper money with denomination of Rs 500 and Rs 1000. In spite of the fact that this
declaration turn into a stun for the entire nation yet rather than that a great many individuals had bolstered
that choice and considered as large advance towards the " Good Days" for the nation. Demonetization is a
radical fiscal advance in which money unit's status as a lawful delicate is proclaimed invalid.
Demonetization is a solid decision and particularly in India case the move had been taken by lessening the
measure of money accessible with the Indian individuals to minimize the danger of dark cash and phony
money . With demonetization exertion 86% of Indian money was frozen overnight expected to wash the
load of bootleg market money supply and fake notes out of the economy and change over it into the licit,
managed a record and assessable, some part of the economy. The web organizations in India like Flipcart,
Shopclues , Snapdeal, Oyo Rooms and Ola had lauded the move , saying it will expand the computerized
installments and considered the general change will profit the Indian Economy in long run. To decrease
the impact of sudden business fall, the legislature had additionally took the choice that a 50 days time
frame guaranteed where the Indian populace could trade their old money with section of Rs 500 and Rs
1000 with recently planned Rs 500 and Rs 2000 notes or store them into financial balances. Independent
of the across the board anguish and family unsettling influences an idealistic opinion had appeared for
that choice.

With Demonetization activity there was obviously botched first and foremost , as money is the most
favored method of exchange in India. Not as much as half of the populace utilizes keeping money
framework for their exchanges. This demonstrated an outrage among the Indian populace due to the
oversaw and ill-equipped keeping banking system. In the beginning the banks didn't have enough supply
of recently outlined cash . This choice had caused a sudden breakdown in Indian economy. The economy
had influenced in exchanging viewpoints and areas like horticulture, angling were practically closed down
at the underlying phase of declaration. By the by, India's demonetization move was fumbled before all
else however the impact at small scale level look profitable. For instance illicit exercises like fear based
oppression financing and so forth had been totally hit around then. With demonetization come in compel
it had repaired India's falsifying issue for the close to met term. With the invalidation of the greater part of
the money the significant piece of the money driven bootleg market was stopped to work. It was
additionally a believed that this choice will wipe out a measure of debasement and tax avoidance in land
showcase. With the choice of demonetization the legislature likewise took a choice to make advanced
India. Numerous installment organizations Paytm and Freecharge saw a surge in acknowledgment of their
computerized wallets. As per this investigation this will give a major lift to loaning and credit as the
computerized records of the brokers will build the general request in the Indian Economy

Need of The Study

Demonetization has been utilized as a full scale - monetary strategy by the administration to direct or
adjust the financial undertaking of the nation by keeping a certain goal to handle major issues which
influenced the Indian economy like fake money available for use and fear financing, debasement, hawala
exchanges, and so forth.

IMPACT ON THE INDIAN ECONOMY

In this work, The Indian Economy which was charged as the "quickest developing real economy" in the
world and the "main brilliant spot" among competitive Markets appears to have slowdown o even before
the most recent "stun treatment" of "demonetization". Without a doubt, the as of late discharged
development figures from the CSO or the Focal Measurable Office thought to be the official
department that discharges anticipated, and real development figures (aside from the RBI or the
Save Bank of India and the Fund Service) clues at a slowdown in the Indian economy
notwithstanding amid the quarter before demonetization happened. While this is in fact cause for
worry with anticipated development figures overhauled downwards from 7.6 % to 7.1% for the money
related year March 2017, what is cause for more noteworthy stress and even caution is the view among a
few financial analysts including the previous Prime Minister Dr. Manmohan Singh that the present and
continuous endeavor to flush out dark cash would shave a decent 2% of the Gross domestic product or the
Gross Local Item.

To be sure, some research organizations and research establishments, for example, Ambit Exploration
have given considerably more desperate evaluations with their projections of development figures having
a tendency to be in the under 3% range. Obviously, the agreement see among numerous financial experts
is that while there would be without a doubt a perceptible stoppage in the economy for a "quarter or two",
the majority of them appear to concur that development would in fact bob back and the Indian economy
would recapture its energy also as turnaround with a reestablished feeling of energy because of higher
duty incomes. Having said that, one must remember the way that according to the current gauges by a few
market analysts, about 90% of the aggregate trade out course has returned into the banking system and
hence the expressed motivation behind the Demonetization practice which was to "douse" dark cash and
empower the RBI to bring down its liabilities subsequently giving the legislature a gigantic profit appears
to have been misrepresented. Obviously, there are some who now contend that the keeping money
Framework policies of Indian people was "flush with money" and this has empowered the administration
to "prod" the RBI to slice rates and also to enable banks to pass on the advantage of adequate liquidity to
customers by bringing down loaning rates.

Merits / Advantages

 Banking Sector will be benefited with cash inflows / higher deposits which directly had impact on
lending rates and acts as economy booster in long run.
 Banks Lending percentage will be enhanced with lower cost of capital and interest rates, key
contributor of economy Fiscal deficit will come down .
 Demonetization exertion has helped the government in tracking black money. With this
achievement the government found large sum of undisclosed income that was hidden by tax
evaders. According to the estimation made by Reserve Bank of India that during the
Demonetization exertion people had deposited approximately more than 3 lakh crores
worth of black money in the bank accounts.
 Demonetization action become a major achievement to stop all the major activities such as
funding terrorism, gambling, in inflating the prices of gold and other social evils. It helps in
putting an end of people from doing illegal activities which results in making an Indian
economy corrupted.
 Country Trade deficit will be reduced i.e. higher GDP (Gross domestic product) growth indicator
of future growth prospects.
 Demonetization was a targeted strike at only those suspected to be in possession of ill-gotten,
unaccounted money in our country.
 Country’s overall rating in global scenario given by recognized rating agencies like CRISIL etc
will be improved, criteria for FIIs (Foreign Institutional investors.
 Demonetization had a major impact on Economic terms that results the number of
taxpayers had increased and a large number of shell companies had been identifies.
Government also utilized this undisclosed income for the better welfare and development of
the society
 Demonetization move had controlled the circulation of fake currency notes .
 Money deposit under Prime Minister Jhan Dhan Yojana had benefit the overall economy
as deposits under this scheme was used for development of the country.
 The dream of making India digital was quite fulfilled with the demonetization move.

De-merits / Disadvantages in current scenario

 Trade/Liquidity market was completely mash out. On the off chance that this isn't controlled in
close term will had unfriendly effect on economy esp. in short term , for example. higher
swelling, Befuddle of interest and supply as dealings/trades would be in perceived cash notes just
and so forth .
 New cash streams should be enhanced esp. in town/inside zones of urban areas/towns affecting
existence of both normal man and economy all in all.
 In spite of the fact that it benefits E-method of installments yet it to a great extent for instructed
individuals, No particular arrangement for uneducated /town individuals living in inside regions
of urban areas/towns.
 Managing an account Area isn't all around outfitted with such demonetization move influencing
its everyday capacities in spite of the fact that govt. is making sufficient strides in such manner.
 Saving money Resource financing quality will be affected in shorter period as EMIs/Installment
will be hampered/affected.
 There are different types of Dark Cash additionally Eg: Interests in Land, Money financing to
Decision parties with no appropriate records and so forth this should be properly checked and
controlled on the off chance that we have to achieve sole target of finish disintegration of dark
cash from Indian economy as demonetization of 500 Rs and 1000 Rs notes alone won't dissolve
dark cash totally.
 After demonetization conclusion, Govt. reforms must be required especially. in real estate
area and MSME else it will had unfriendly effect on both work and economy.
 Agriculture sector had effected negatively as in this sector all the major transactions are
done in cash. Due to currency with denomination of Rs 500 & Rs 1000 become frozen
overnight, farmers had faced many problems in selling their production.
 Buyers of retail market had shifted to malls market ( big bazar, reliance fresh)which effects
the income of normal small sellers
  Trading activity has been highly disaffected by this demonetization move as it was difficult
for the users and sellers to adjust with the new monetary policies.

EFFECT ON COMMON MAN

The primary rationale behind the approach is to bring a gigantic measure of trade noticed that are out
unaccounted riches into standard economy and decrease the use of phony money. Notwithstanding, we
realize that around half of India’s economy generally relies upon money exchanges keep running by little
and medium measured associations. As per market analysts, the approach will affect these undertakings
and could prompt the thump on impact on the development of the economy. Let us see how the boycott
of these money notes will influence the lives of average citizens:

Merits

 Purchasing power will be enhanced, specifically connected with swelling (Ascend in costs)
i.e. controlled costs will straightforwardly affect on common man and had much
consumption power.
 Banks Financing costs will be lessened making it simple for regular man to benefit new credits at
the end of the day we can state loaning would be much receptive for basic man.
 Govt. had extent of presenting new plans for welfare of normal man.
 Lesser Expense Obligation , Lift for investment funds and utilization
 New Work openings set up.

De-merits

 Cash smash in market having its immediate effect on demand and supply especially for common
man.
 Current money trade limitations making it life troublesome for regular man, In spite of the fact
that Government is routinely changing standards for better adherence.
 People in small rural areas have affected the most as here the major transactions are done
in cash and with the shortage of cash in banks and lesser bank withdrawals had made them
paralyzed and not able to do business.
 Dynamic changing money rules getting everyday affected both for basic man and banking
institutions.
 This move had hurt the sentiments of common people as people are attached with old
currency and it was quite difficult for common man to give a sudden acceptance to the new
currency.
 Dealings in real money unfavorably affected esp. for little retailers/merchants and so forth
 Dread of joblessness in MSME and other little assembling/unrecognized divisions where greater
art is money dealings as same is to a great extent influenced/Impermanent shut because of
liquidity crunch.
 Addition charges are to be bear by common man due to use of plastic money as Visa and
master card services are not being provided by Indian government
 Conclusion

Demonetization of Rs 500 and 1000 Rs notes will profit the economy in long run in any case it is
fallen holy messenger. We can't state that demonetization alone can battle against debasement and
dispense with dark cash. Different other strong measures are likewise required by the Government
and Indian individuals to get a decent change in the economy. In the present period demonetization
are based on extremely basic subject Studies construct just in light of hypothetical investigation
could prompt deluding conclusions .For achieving any decision a genuine report ought to be
required by considering the long haul information examination. In the meantime we ought to
consider alternate factors, for example, Goods and administrations assess, land part change and the
keeping money framework since these variables assumes an essential part in Indian economy.
General we can state that demonetization may create different great things in the economy. In the
meantime it makes unavoidable wage and welfare misfortunes to the poor area of the general
public who are subject to their every day profit. It will be a noteworthy test for the general
population who are not acquainted with the computerized exchange culture. The entire strategy
may boomerang as there is a total request fall and individuals lose their occupations in the messy
zone in the adjacent term. So there is essential for solid affiliation and compelling technique system
to ensure that these activities are executed in an unclear nerve from they were intentioned