DEMONETIZATION

- ANURAG
16122003
HARSHA
16122013
What is Demonetization?
Demonetization is the act of stripping a currency unit of its
status as legal tender. It occurs whenever there is a change
of national currency.
Why Demonetization?
1) To combat inflation.
2) To combat corruption and crime.
3) To discourage cash dependent economy.
4) To facilitate trade.
Past examples of Demonetization
1) Coinage act of 1873.

2) 2002 European Union .

3) 2015 , Zimbabwe combating hyperinflation.

India’s Demonetization in 2016
-In 2016, the Indian government decided to demonetize the 500- and 1000- rupee notes, the
two biggest denominations in its currency system.

-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.
Procedure
-Plan of demonetization began six to ten month prior.
- Governor of RBI and Economic affair secretary explained the purpose to be fighting terrorism
funded by counterfeit notes.
- media had reported in October 2016 about the introduction of ₹2,000 denomination well
before the official announcement by RBI.
-Prior leak to information.
-
Reactions
- Mrs. Arrundhati Bhattacharya and Mrs. Chaddha Kocher appreciated the move in sense it
would help to curb black money.
-Businessmen Mr. Ananad Mahindra, Mr. Sajjan Jindal , Mr. Kunal Bahl supported the move
adding that it would accelerate e-commerce.
- Indian-American economist Jagdish Bhagwati praised Demonetization.
- Indian Supreme Court criticize govt. the decision of sudden demonetization.
-Nobel laureate Amartya Sen , severely criticized demonetisation calling it “despotic action”.
-Former SR. VICE PRESIDENT and CHIEF ECONOMIST of WORLD BANK ,Kaushik Babu , called it
“major mistake”
-many major and noted economist criticized demonetization!
Aftermath of Demonetization
Banking!
- In the first four days after the announcement of step , about Rs 3 Trillion in the form of Rs 500
and 1000 banknotes had been deposited
-Over 18 crore transactions were handled on the first four .
-Btw 10 NOV and 26 NOV , banks reported exchange and deposit of demonetised banknotes
worth 8.45 trillion rupees , during same period 2.16 lakh crore has been withdrawn by people
from there accounts.
Illegal Activites
- Human trafficking , declined due to demonetization but again
rebounding in following months .
-Radical groups , Moist and Naxalites were badly hit, surrender rate
hit highest.
-Hawala came to setback
Cash shortage!
- Scarcity of cash led to chaos .
-ATM were running out of cash after few hours of being functional.
- Violence were reported in many part of nation.
-Shops were looted in some part of Madhya Pradesh as they refused to accept 500 notes.
-The cash shortage remained till APRIL 2017 , were 89% were out of cash in Hyderabad and 69%
in Pune.
Stock Market
Transportation Disruption
- 800,000 truck drivers were affected with scarcity of cash
- 400,000 trucks stranded at major highway across India were reported.
-Toll Plaza operator refuse to take old notes.
-led to suspension of tolls by Ministry of Transport.
GDP growth
Business
- Cigarette sale across India witnessed fall of 30-40% in sell.
- E-commerce companies saw decline of 30% on COD’s.
-Digital transaction and Cashless economy.
- BHIM app was launched , based on Unified interface payment.
Result!
- Drop in industrial output.
-There were loss of jobs , in unorganized sector.
-Income tax filling increases.
-Municipal and local tax payments jumped.
-
RBI Report
- during 2016-17 , 41.5 Cr of fake currency notes were detected in form of old 500 and 1000 this
is well above 27.4 Cr ,detected in 15-16.
-Estimated value of 15.44 lakh crore rupees ,only 16000 crore worth demonetised did not come
back , roughly 99% of money came back to system.
-decrease in RBI’s surplus since it’s income decreased by 23.56% and expenditure increased by
107.8%.
- growth of GDP slowed down sharply by 7 %.
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