Proceedings of International Conference on Strategies in

Volatile and Uncertain Environment for Emerging Markets

July 14-15, 2017
Indian Institute of Technology Delhi, New Delhi
pp.598-607

From Demonetisation to Digitization of Indian Economy: The Road Ahead

Ashutosh D. Gaur1 and Jasmin Padiya2

Abstract
This paper analyses the demonetisation, its after effects on the digitation of Indian
economy. Demonetisation of Rs. 500 & Rs. 1000 currency note constitutes 86.4% of
economy. When this percentage of currency circulation is to be invalidated in the cash-
dependent economy, the reintroduction of cash must be planned to minute details to
minimize the disruption, especially for those who had no alternative to using cash. The
demonetisation has been done to deal simultaneously with black money, corruption,
and terrorism financed by a counterfeit currency which was the work of anti-national
and anti-social elements. Demonetisation opens the passage to the cashless economy
which has been done through digital payments. There is a huge surge in the usage of
E-wallet and mobile payments have been observed. The government of India issuing
guideline through Reserve Bank for the security concern of E- wallets. The paper
examines, varying trends, strategies, and challenges by the study of secondary data
for demonetisation and digitalisation of Indian economy.
Keywords: Demonetisation, Digitization, E-wallet and Public Policy reforms
We took a key step to help the honest citizen of India to defeat the menace of black
money.
-Narendra Modi Prime Minister of India

1. Introduction
In a drive against the parallel economy, Mr. Narendra Modi announced that from midnight of
November 8 all Rs.500 and Rs. 1000 currency notes would cease to be legal tender.
The objective of this announcement to outbreak black money and overthrow counterfeiting of
currency. At a single stroke, 86.4 percent of currency in circulation was deprived of its status
as legal tender. The immediate effect of it was much of commerce frozen, electronic transactions
took place.
While campaigning for the 2014 Indian General Elections, the Bharatiya Janata Party (BJP) laid
huge emphasis on rampant corruption in the government machinery and promised the Indian
public, that if the party would be voted into power, it will solve the problem of black money
which is the root cause of many problems in India. Modi Government formed Special Investigation
Team (SIT) under the leadership of Supreme Court judge M.B. Shah to attack black money and

1. Doctoral Scholar, School of Doctoral Research and Innovation, GLS University, Ahmedabad
E-mail: me@ahutoshgaur.co.in
2. Associate Professor, GLS University, Ahmedabad
E-mail: jasmin@glsict.org
 From Demonetisation to Digitization of Indian Economy: The Road Ahead

defeat corruption during its first cabinet meeting.

Pradhan Mantri Jan-Dhan Yojana (PMJDY) is an initiative aimed at Financial Inclusion for all
people to enable them to use banking services such as savings account, deposit account, and
credit, insurance easily.
The government also launched Income Declaration Scheme, 2016 to bring back black money
into the system. The scheme from June 1, to September 30, the provided an opportunity to
income tax and wealth tax defaulters.
Then Demonetisation of all Rs.500 and Rs. 1000 bank notes of the Mahatma Gandhi Series.
This step invalidated Rs14.18 lakh crore (trillion) of currency.

Figure 1: Stagey of Narendra Modi to Defeat Black Money

Source: Authors own

The government of India imputes to make India a cashless economy which will boost the
economy and open a new form of payment ways like e- wallet and other option.
2. Objectives
1. To analyze early effects of demonetisation in India.
2. To review the Pros & Cons of Digitalization of the Indian economy.
3. Literature Review
(Kotnal, 2017; ) In this study author has analysed, the currency system in India and evaluated
effect and impact of demonetisation in Indian economy. (Prabhsimran Singha, 2017) This paper
aims at analysing the effect of the demonetization policy implemented by the Indian government
by using the concept of sentiment analysis. The result of analysis shows that a large share of
Indian people was happy with this policy. During the initial days, the sentiment was more
towards the negative side as the common man had to suffer many hardships. Ultimately, as
the new bank notes were made available, the overall sentiment of the people became positive.
(Sharma, 2017) This article tries to draw an analysis of steps that have been taken and steps
that could have been taken to make the process more effective after demonetization. (Ghosh,
2017, ). One of the objective of this paper is to develop a macro-theoretic model to examine
the likely impact of demonetization in India. This paper validates that demonetization is likely to
bring about the cumulative decline in output levels in both the organized and the unorganized
sectors. To what extent the cumulative contraction in output levels will take place depends

599
 Ashutosh D. Gaur and Jasmin Padiya

upon how fast the economy is remonetized. Remonetisation will reverse the process of cumulative
contraction. If to achieve the goal of digitization to the maximum possible extent, remonetization
is delayed, the contraction in output levels may be severe causing considerable harm to the
masses. Demonetization affects the poorer segments of the people the most. (Dr. Deepak
Tandon, 2017) In this study, the Author has analyzed and evaluated all aspects of demonetisation.
The author also discussed the viewpoint of various political leaders. (Balaji, 2017, ) In this
paper, author attempts to study the demonetization process in India and its impact on cashless
transactions. (Thimmaiah, 2016) In this study, author focuses to understand the impact of
demonetisation in the economy and aim to understand the effects of cashless transaction in
different industry. Author also aims to understand the aftermath of demonetization. (Rani, 2016)
In this paper author explains problems faced by shopkeepers, how their business affected and
the effects on most popular brands sale. This paper also noted that consumers are shifting to
cashless means such as Paytm, internet banking etc. Author discusses that by adopting the
cashless means certainly there will be a check on black money. (Shirley, 2017) In this study,
authors discusses in depth the impact of demonetization in India and highlight the effect of it in
other countries. (Carmen Leonga, 2017) In this study author focuses hurdles of demonetisation
and to clout the opportunities. Offers the tactical competence for a firm to occupy a marketplace
in financial sector. Benefits includes the cohort of substitute credits cores based on non-traditional
information. Improves the economic annexation of formerly excluded market segments. (Madureira,
2017) In this study author has focused on role of Near Field Communication (NFC) services to
replace credit/debit cards (for payment, ticketing, transport, etc.) by bringing better-quality
accessibility and functionality. Author also highlights the factors that hampers the accomplishment
of SIM-based mobile NFC services deployments. (Solat, 2017) This is a comprehensive
survey of the security of electronic payment systems showing that in all types of electronic
payment systems there is some important flow and weaknesses in security, user privacy,
anonymity and performance. It is crucial to enhance and improve the current level of the security
of the financial transaction systems with respect to all necessary properties to achieve a secure
and reliable payment system. (Swaminathan, 2016) In this study, author analyses customer
awareness and satisfaction level of the e- banking services. The outcomes of the study shows
that the customers have moderate level of satisfaction in e- banking services. (Ramasubbu,
2009) In this study author argued about the advantages of digital wallets over physical wallets
and highlighted the four factors for Singapore Market for digital wallets and demonstrated a
prototype of digital wallet. (M. F. Mridha, 2017) In this study, author states that the world is
moving towards with an automated payment system thats compatible with international standards,
but growing number security concerns are also hindering its popularity. Internet banking is a
worthwhile for research study so that the quality of service can be improved.. (Shin, 2009) In
this reading, the author authenticates an inclusive model of customer approval in the context of
mobile payment. It uses the integrated concept of approval and use of technology (UTAUT)
model with construct of safety, trust, social power and self-efficacy. The outcome of the analysis
shows that users attitude and intents are influenced by perceived safety & conviction. (Saleem
Kadhiwal, 2007) In this study, author has discussed the physiognomies of mobile payment
systems and the concerns regarding safety and standards, which must be addressed to have a
secure m- payment. Author also gives an overview of technologies, devices, protocols and their
security concepts. (Caldwell, 2012) In this study to discuss various platform of the e-wallet and
highlighted the key reason why Google wallet was vulnerable to instinctive power attacks and
that its design seemed to be based on patented technology instead of documented standards
& processes. Author argues E-wallets have high adoption rates in developing countries and
look set to become established worldwide. The challenge of ensuring security may well affect

600
 From Demonetisation to Digitization of Indian Economy: The Road Ahead

how for the e-wallet become parts of all our daily lives. (Upadhayaya, 2012) In this study, the
author states that e- wallet is a convenient, easy- to- use, safe universal payment system.
(Jan Markendahl, 2017) In this paper author put its focus on the use of Near Field Communication
Technology (NFC) to mobile payments. Author recognises a discrepancy between vision &
proposals and how the actors are organized for real service although the technical architecture
and solution can and need to be standardized to enable product development, the business
architecture need to be approved by all involved players at definite marketplaces where the
facilities will be provided. (Eyong B. Kim, 2002) This study examines the feasible encouragement
and the perceived approval of online retail shopping among university students. The study finding
imply that the online retailers may need to put emphasis on specifying how they guarantee on-
time delivery and risk free, hassle free return clearly on their web page they should follow what
they promises as much as possible to improve shoppers satisfaction clearing specified policy
or explanation will perhaps make customer more satisfied and trust website more. (Swilley,
2010) In this study author investigates new insight about e-wallet and seek to understand
consumer rejection of a technology, specifically wallet phone technology using technology
acceptance model. (R.Varsha & M.Thulasiram, 2016) In this study author has analysed the
consumer behaviour towards the acceptance of E-wallet services. The study was conducted in
Trichy and Thanjavur districts of Tamil Nadu. E-wallet which are considered as a hi-tech platform
for money transactions and payments have been perceived to be comfortable and reliable,
indicating high levels of acceptance. The e-wallet service providers need to strategize targeting
not only at students and the youth, but also other age groups. (Parul Mahajan, 2017) The
consequence of demonetization has been deliberated on numerous members of financial inclusion
drive such as normal people, informal sector, rural people, MSMEs, NBFC, MFIs and e-wallet
enterprises. The findings of the study reveal that ordinary individuals were the most adversely
affected. (Magnier-Watanabe, 2012) In this study, an inclusive model integrating consumer-related
variables affecting the acceptance of mobile payment systems has been proposed. These
variables include perceived ease of use, perceived usefulness, facilitating conditions, attitude
toward using, perceived value, perceived security and privacy, social influence, trust, behavioural
intention to use, perceived risk, and attractiveness of alternatives in the context of mobile
payments. (Leonardo Caporarello, 2014) This study evaluates the acceptance of NFC-enabled
cell phones in terms of technological as well as cultural point of view. Author argues the display
of status and wealth is noticeable in the culture and individuals are keen to buy and spend in
the newest and stylish gadgets and technologies. (Jason J. Zhang, 2009) In this study, author
has discussed the facts of m-commerce and the prominent differences between m-commerce
and e- commerce. Author has identified significant features that must be taken into deliberation
to design valued m-commerce applications. Author highlights that the realisation of m-commerce
depends on the interaction of three major factors: technology modernisation, development of a
new value chain, and active buyer demand. (Lai, 2012) In this research, it might be outcome
that the apparent helpfulness, the apparent comfort of use is certainly related to users attitude
toward using, and the apparent ease of use is definitely associated with the apparent helpfulness.
It mean the useful and easily operation of payment clinic fees with e-wallet products is highly
significant for the consumers. (Chauhan, 2015) The objective of this study is to comprehend
the reception of m-money among below-poverty-line people in India, by means of the technology
acceptance model (TAM). The m-money service is a key feature that can support the delivery
of low-cost and swift money transfer through cell phones, in emerging countries such as India.
For a large section of the population in India, m-money can act to achieve nancial inclusion.
However, for m-money to succeed, users should accept the initiative wholeheartedly. The
ndings suggests that the trust and the central builds of TAM such as apparent usefulness,

601
 Ashutosh D. Gaur and Jasmin Padiya

belief and attitude towards usage add in inuencing the intention to accept m-money. Apparent
ease of use neither impacts apparent usefulness nor attitude towards use. (Sai Kalyan Kumar
Sarvepalli, 2016) This study aims to analyse e-wallet mechanism in India, opportunity for the e-
wallets advantages and disadvantages, issues and challenges.
4. Research Method
As the research paper is of conceptual and review nature, the researcher has applied exploratory
research design by using varied secondary data availed from the secondary data sources.
Based on the secondary data and review, the researcher has reported on various emerging
trends and issues and challenges in demonetisation to the digitization of Indian economy.
Various research reports, journal, and newspaper article from eminent writers have been reviewed.

5. Findings

Figure 2: Value of High Denomination Notes in Value of All Notes in Circulation (in %)
Source: Authors construction based on data extracted from RBI (2016), Handbook of Statistics of
Indian Economy 2015-16.

The above figure shows the value of high denomination notes in the value of all note in circulation
before November 8, 2016. This is the largest number in last 16 years because of this nation
was facing many problems

602
 From Demonetisation to Digitization of Indian Economy: The Road Ahead

Figure 3: Per Capita GDP and Currency in Circulation as Percentage of GDP

Source: Authors construction Extracted from BIS, Statistics on Payment, Clearing and Settlement
System, table1 and table 2, available at http://www.bis.org/cpmi/publ/d155.htm,

The above figure shows that Indias per capita GDP and currency in circulation as a percentage
of GDP is more than the average i.e. 9%, therefore, transforming the Indian economy to a
cashless is a need of the hour.

(Shirley, 2017)

603
 Ashutosh D. Gaur and Jasmin Padiya

The above table shows the history and the outcome of the demonetisation done by varies
countries.
The Best Five Cashless Payment Options in India are as Follows: (Balaji, 2017, )
1) E-Wallets E-wallets have become very much popular nowadays. These e-wallets make use
of phone number or the QR code and the transactions will be done in a matter of minutes.
2) UPI Unified Payments Interface is another great way for cashless transactions... Through
UPI we can transfer the amount very easily all that we need are two important things,
smartphone, and bank account. The recent app developed by National Payment Corporation of
India, based on UPI, is BHIM.
3) Plastic Money The debit as well as credit cards which are used for dealings in ATM and
in Point of Sales are known as the Plastic money. This plastic money reduces the security
risk of carrying the hard cash.
4) Net Banking Almost all banks provides the Net Banking facility to its customers. All that
the customers need to do is to enable the e-banking facility for their bank account to go
cashless. Net Banking is the most convenient way for the customers to do all their transactions
without visiting the branch. Customers can make payment, transfer and receive the amount by
ourselves through this e-banking facility.
5) Aadhaar Card By linking the Aadhaar card to our bank account we can make use of
Aadhaar card enabled payment system. After linking our Aadhaar card to our bank account, we
can do our transactions by means of our fingerprints.
Advantages of Cashless Transactions (Balaji, 2017, )
The cashless transactions provide benefit in long run and it changes the deep-rooted behavior
among the people.
1) Cost Effective to Banks: If a transaction is done manually at the branch of the bank it
costs Rs.40 to 45 but if the same transaction is done through online it costs roughly Rs.7 to 8.
This reduces the cost of operation for the banks and also makes it convenient for both banker
and the customer.
2) Low Time Consumption: Apparently, the cashless transactions reduce the time consumption
for the customers and it minimizes the count of customer complaints. The customers, with the
help of various options for cashless transactions, transfer or receive the amount in a matter of
minutes and saves the time of visiting and carrying out the transactions in the bank branch.
3) Safe and Secure: Cashless transactions provide high-end security by means of availing the
facility of fingerprints and One Time Password (OTP) for every transaction.
4) Up-gradation of Technology: The shift from the conventional banking to cashless transactions
brings technological advancement. The banks increase their ATMs, PoS machines count and
various other features in the e-banking domain periodically.
5) Control of Black Money and Check for Anti-money Laundry: There is a traceability feature
in e-banking unlike the cash transaction so it is easy to check the anti-money laundry and
black money circulation in the country. It reduces many financial scams in our country and
enhances the proper economic growth.

604
 From Demonetisation to Digitization of Indian Economy: The Road Ahead

6. Result and Discussion

Demonetisation in such a huge extent and introducing new currency is a gigantic process with
a massive task. There are two vital parts in the strategy of Indias demonetisation that require
study. First, the scale of demonetisation and second, the time frame for the completion of the
procedure. The demonetisation of the two highest denomination currency notes was accompanied
by the introduction of new series of Rs.500 notes and the currency of an even higher
denomination- Rs. 2000 currency note. It is also likely that over time the stock of Rs.2000 not
brought down by winding down the printing of this currency.
Digitisation of monetary transactions has been in progress for more than a decade now. The
new impetus to digitation after demonetisation. Digitization should percolate to grass root levels
i.e. villages and to farmers so that real transformation of the economy will take place. The
government of India has made provision for a huge amount of revenue in the union budget for
computer literacy this is import step of the digital economy. Digital India can also play a
significant role in digitalization of economy.
The aim of demonetisation is to attack black money. This objective of curbing black money will
not be achieved only with demonetisation drive. The government must address the Gold and
real estate sector to defeat black money. A huge amount of black money is in the foreign bank
which is tax havens like Mauritius and Cyprus a strong action is required on this front also.
There is an argument that Indias large population live in a village so e-wallet and digital economy
cannot do many transformations. The answer for the IT users in India is much larger than the
population of me develop country there for e-wallet has a great future in India.
7. Conclusion
People who change after change will survive
People who change with change will succeed
People who cause the change will lead
-Narendra Modi Prime Minister of India
This quote of prime minister is very important in this context. This show the determination and
a political will to change the entire structure of the economy and to build cashless India.
Demonetisation may hit the GDP growth of the country for two financial quarters, but the result
will be positive in long run.
Managerial and Public Policy Implications
Managerial Implication of demonetisation that every business man must have a digital platform
to do the business transition. The public policy implication is the country will move toward
cashless economy there right legal framework is required for digital transactions. To achieve the
vital objective of demonetisation Government of India i.e. cashless economy should incentivise
the digital currency. The policymakers should increase the usage of digital currency. It should
be the broad base to promote financial inclusiveness. Last but not the least, policy makers
should accelerate initiatives against gold & real estate sectors to liberate the country from the
dark shadow of black money.
Acknowledgement
Researchers are grateful to the IIM-A library officials for providing access to library resources.
Researchers are grateful to all previous researchers who have carried out significant work and
paved foundation for this research work.

605
 Ashutosh D. Gaur and Jasmin Padiya

References
Balaji, K. C. (2017) A Study on Demonetization and its Impact on Cashless Transactions, International
Journal of Advanced Scientific Research & Development, 58 64.
Caldwell, T. (2012) Locking Down the e-wallet, Computer Fraud & Security, 5-8.
Carmen Leonga, B. T. (2017) Nurturing a Fin Tech Ecosystem: The Case of a Youth Microloan Starts up
in China, International Journal of Information Management, 92-97.
Chauhan, S. (2015) Acceptance of Mobile Money by Poor Citizens of India: Integrating Trust into the
Technology Acceptance Model, http://dx.doi.org/10.1108/info-02-2015-0018, 58-68.
Dr. Deepak Tandon, M. B. (2017) Demonetization in India: The Good, Bad and Ugly Facets, Asian
Journal of Research in Business Economics and Management, 41-47.
Eyong B., and Kim, S. B. (2002) Designing Effective Cyber Store user Interface, Industrial Management
& Data Systems, 241-251.
Ghosh, A. (2017) Impact of Demonetization on India: A Macro-Theoretic Analysis, Trade and
Development Review, 57 - 73.
Jan Markendahl, P. A.-G. (2017) Can mobile eco-systems for technical innovations be standardized?-
The case of mobile wallets and contactless communication. Retrieved from www.econstar.eu: http://
hdl.handle.net/10419/52216
Jason J., and Zhang, Y. Y. (2009) Driving Forces for M-Commerce Success, Journal of Internet
Commerce, 81-104.
Kotnal, D. J. (2017) Demonetization Impact the Indian Economy: A Descriptive Study, International
Journal of Applied Research, 599-603.
Lai, Y.-H. (2012) The Study of Technology Acceptance for e-Wallets Application of Clinic Fees Payment,
1082-1087.
Leonardo Caporarello, M. M. (2014). Does Culture Make the Difference? Technology Acceptance
and Diffusion in India, 8th Mediterranean Conference on Information Systems (p. http://aisel.aisnet.org/
mcis2014/15), AIS Electronic Library (AISeL): Verona, Italy.
M. F. Mridha, K. N. (2017) A New Approach to Enhance Internet Banking Security, International Journal
of Computer Applications, 35.
Madureira, A. (2017) Factors that Hinder the Success of SIM-based Mobile NFC Service Deployments,
Telematics and Informatics, 133-150.
Magnier-Watanabe, D. L. (2012) Building a Research Model for Mobile Wallet Consumer Adoption:
The Case of Mobile Suica in Japan, Journal of Theoretical and Applied Electronic Commerce Research,
94-110.
Parul Mahajan, A. S. (2017) Effect of Demonetization on Financial Inclusion in India, 6th International
Conference on Recent Trends in Engineering, Science & Management (pp. 1282-1287), Anandpur
Sahib: www.conferenceworld.in.
Prabhsimran Singha, R. S. (2017) Sentiment Analysis of Demonetization of 500 & 1000 Rupee
Banknotes by the Indian Government, The Korean Institute of Communications Information Sciences.,
http://dx.doi.org/10.1016/j.icte.2017.03.001.
R.Varsha, and M.Thulasiram (2016) Acceptance of e-wallet Services: A Study of Consumer Behavior
, International Journal of Innovative Research in Management Studies, 133-141.
Ramasubbu, R. K. (2009) The Digital Wallet: Opportunities and Prototypes, IEEE Computer, 42(4),
100-102.
Rani, G. (2016) Effects of Demonetization on Retail Outlets, International Journal of Applied Research,
400-401.
Sai Kalyan Kumar, and Sarvepalli, N. R. (2016) A Study on the Scope of the Virtual Wallets in Indian
Market -Issues and Challenges, International Journal of Multifaceted and Multilingual Studies, 10.

606
 From Demonetisation to Digitization of Indian Economy: The Road Ahead

Saleem Kadhiwal, M. A. (2007) Analysis of Mobile Payment Security Measures and Different
Standards, Computer Fraud & Security, 12-16.
Sharma, A. C. (2017) Demonetization in India and Change Management: What has been Done and
What could have been Done, Imperial Journal of Interdisciplinary Research, 120-121.
Shin, D.-H. (2009) Towards an Understanding of the Consumer Acceptance of Mobile Wallet,
Computers in Human Behavior, 13431354.
Shirley, M. J. (2017) Impact of Demonetization in India, International Journal of Trend in Research and
Development, 20-23.
Solat, S. (2017) Security of Electronic Payment Systems: A Comprehensive Survey, arXiv:1701.04556.
Swaminathan, S. (2016) Technology Enabled Banking Facilities and Satisfaction - Customers View,
Namex International Journal of Management Research, 139-143.
Swilley, E. (2010) Technology Rejection: The Case of the Wallet Phone, Journal of Consumer Marketing,
304-312.
Thimmaiah, M. B. (2016) Demonetization Won or Lost, Acme Intellects International Journal of
Research in Management, Social Sciences & Technology, 1-15.
Upadhayaya, A. (2012) Electronic Commerce and E-wallet, International Journal of Recent Research
and Review, 37-41.

607