TABLE OF CONTENTS

SR. NO. PARTICULAR PAGE

NO.
1. 1. CHAPTER I
1. EXECUTIVE SUMMARY
2. OBJECTIVES OF THE STUDY
3. RESEARCH METHODOLOGY
4. LIMITATIONS OF THE STUDY

2. 2. CHAPTER II
DEMONITISATION IN INDIA
1. INTRODUCTION
2. HISTORY
3. PROCEDURE

3. 3. CHAPTER III
IMPACT OF DEMONETIZATION
1. IMPACT ON INDIAN CURRENCY
2. SECTORAL IMPACT
3. BENEFITS AND SHORTCOMING
4. 4. CHAPTER IV
EXPERTS OPINION ON
DEMONITISATION
1. MR. ANIL BOKIL
2. DR. MANMOHAN SINGH
3. DR. RAGHURAM RAJAN

5. 5. CHAPTER V
SURVEY AND ANALYSIS

6. 6. CHAPTER VI
CONCLUSION

7. 7. CHAPTER VII
BIBLIOGRAPHY

8. 8. CHAPTER VIII
ANNEXURE

1
 CHAPTER I

1.1 EXECUTIVE SUMMARY

When Prime Minister Mr. Narendra Modi announced that currency with the
denomination of 500/- and 1000/- would cease to be the legal tender from 9th of Nov, the
whole country was stunned. This decision caused sensation in the whole country. Social
Media was flooded with messages and information. People started counting the trash they had
accumulated for years legally or illegally. Some tried to invest their dying currency in gold.
Some contacted their near and dear ones in this miserable hour. People could get only Rs
4000/ of old denomination exchanged with the new one. Big queues before the banks and
ATMs became the order of the day. We shall see a great impact of this move of the Central
Govt on Indian Society and Economy. The first impact shall be that people will have lower
expenditure power. With that they will not be able to purchase luxurious things.

Demonetization will have an impact on the various sectors in India. There is great
impact on cashless economy due to demonetization. There shall be no ostentatious
expenditures on marriages and other ceremonies. So the society will grow lesser materialistic
and people more prudent. With the fake money destroyed, Indian economy will see a big
boom and the so-far-booming-real-estate-sector shall fall on the ground.

The things may be cheaper. Indian Currency may get respect at the international
market. There may be a great check on the terror-related funding and therefore on terrorist
activities. Corruption shall be down to a great extent as people will stop the tendency of
accumulating money using wrong means. These big moves will certainly a bridge the gap
between the haves and the have-nots. However, there may be some difficulties for a couple of
months. But this inconvenience shall be temporary and for short-term.

On the first anniversary of Demonetization, the impact of demonetization is explained

by various experts.

Finance Minister, Mr. Arun Jaitley It was ethical drive, watershed moment.

Former PM Manmohan Singh Demonetization was organized loot, hit economy.

2
1.2) Objectives of the study:-

1. The main objective of the study is to know the effect of demonetization on financial
sector and other sectors.
2. To know the impact of demonetization in India.
3. To know whether demonetization was helpful or not for Indian economy.
4. To study the impact of demonetization on the general public.
5. To study the impact of demonetization on Cashless economy and digitalization.

1.3) Research Methodology:

1. The topic Demonetization in India is based on survey method.

2. For the same I collected information through internet and mostly through secondary

data.
3. I have also collected information through primary research by sending questionnaire

to general public.

1.4) Limitations of study

Study only covers people living in Dombivli, Kalyan areas.
Effects of demonetization can be completely understood only in the long term period.
Random Sampling method is followed and the sample size is limited.

CHAPTER.II

3
 DEMONITISATION IN INDIA NOV-2016

2.1 INTRODUCTION

4
 On November 8, the government announced its decision to discontinue the legal
tender status of Rs 500 and Rs 1000 notes. The original objectives were stated as removing
fake currency, inflicting losses on those with black money; and disrupting terror and criminal
activities. Later, new objectives were tacked on: enabling growth in bank credit, turning India
into a cashless economy. Demonetization is a generations memorable experience and is
going to be one of the economic events of our time. Its impact is felt by every Indian citizen.

Demonetization affects the economy through the liquidity side. Its effect will be a
telling one because nearly 86% of currency value in circulation was withdrawn without
replacing bulk of it. As a result of the withdrawal of Rs 500 and Rs 1000 notes, there
occurred huge gap in the currency composition as after Rs 100; Rs 2000 is the only
denomination. Absence of intermediate denominations like Rs 500 and Rs 1000 will reduce
the utility of Rs 2000. Effectively, this will make Rs 2000 less useful as a transaction
currency though it can be a store value denomination. To begin with, demonetization has
often been used a tool to cut down hyper inflation. We, on the contrary, were running smooth
on Inflation and for that matter, were the fastest growing economy in the world. In last few
days there has been quite a lot of debate on demonetization- one of the biggest criticisms
being that the implementation has been quite poor and has caused a lot of inconvenience to
the common man.

2.2 HISTORY OF DEMONETIZATION IN INDIA:-

5
FROM 1946-2016

The whole country was taken aback when Prime Minister Narendra Modi on
November 8 announced that the currencies in the denominations of Rs 500 and Rs
1,000 will be invalid post midnight. However, the lower denomination Rs 10, Rs 20,
Rs 50, Rs 100 and coins will be valid. He further announced that new notes of Rs
500 and Rs 2,000 would introduce shortly.

But what do you think was this the first time an Indian currency was banned of a
sudden?

Well, the answer is NO. A look into the past will make you realize that India is no new
to demonetization. Demonetization has been implemented twice -1946 and 1978 in
the past

THE FIRST CURRENCY BAN:

6
 In 1946, the currency note of Rs 1,000 and Rs 10,000 were removed from circulation.
The ban really did not have much impact, as the currency of such higher
denomination was not accessible to the common people. However, both the notes
were reintroduced in 1954 with an additional introduction of Rs 5,000 currency.

Rs 500 and Rs 1000 notes were introduce in 1934 and after four years in 1938, Rs
10,000 notes were introduce.

THE SECOND CURRENCY BAN:

That came in 1978; the then Prime Minister of India Morarji Desai announced the currency
ban taking Rs 1000, Rs 5000 and Rs 10,000 out of circulation. The sole aim of the ban was to
curb black money generation in the country.

Similarities in 1978 and 2016 ban:

The note ban by Morarji Desai also aimed to drive away black money out of
circulation in the economy. Hence, The High Denomination Bank Notes
(Demonetization) Act was implemented.

Narendra Modi announced the currency ban is an address that was broadcasted across
all news channels. Similarly, Desai announced the ban over the radio after which the
banks were closed for certain days.

Both the affairs were kept confidential.

Differences in the ban:

7
 Unlike Modi, Desai didnt have the backing of the RBI Governor. The Governor
I.G. Patel believed that the ban was implemented simply to immobilize the funds
of the opposition party. Patel also believed that people never store black money in
the form of currency for too long.

It didnt have much effect on the people and affected only the privilege few. While
the recent ban had shaken the whole country.

Coming back to 2016, there is also a buzz that smaller denomination currency
notes like Rs 50 and Rs 100 will also be replaced by incorporating new features
and design. And that reminds us of an incident dating back to early 70s, when
there were rumors of withdrawing Rs 100 note from circulation, and immediately
hoards of people were seen rushing to banks to exchange their Rs 10 and Rs 20
currencies.

The first instance was in 1946 and the second in 1978 when an ordinance was
promulgated to phase out notes with denomination of Rs 1,000, Rs 5,000 and Rs
10,000.

The media in terms of numbers was limited in 1946 and 1978 when compared to
2016. But given the importance of the decisions, it did trigger coverage.

Newspaper and magazine archives of the 1946 decision do not seem to be

available online. Therefore, I relied on Reserve Bank of India commissioned
history of Indias central bank to get an idea of how a stakeholder perceived the
decision.

8
2.2 PROCEDURES FOR DEMONETISATION

The plan to demonetize the rupee 500 and rupee 1000 bank notes began six to ten
months prior, and was kept highly confidential with only about ten people aware of it
completely. The actual processes and preparation for printing the new rupee 500 and rupee
2000 bank notes began in early-May. The cabinet was informed about the demonetization on
8 November 2016 in a meeting called by the Prime Minister of Narendra Modi followed by
Modis public announcement about the demonetization in a televised address.

1) TELEVISED ANNOUNCEMENT

On 8 November 2016 announced the demonetization in an unscheduled live televised

address to the nation at 20:15 IST. In the announcement, Modi declared circulation of
all Rs500 and Rs1,000 banknotes of the Mahatma Gandhi series invalid effective from
the midnight of the same day, and announced the issuance of new Rs500
and Rs2,000banknotes of the Mahatma Gandhi New Series in exchange for the old
notes.

After Modi's announcement, the Governor of the Reserve Bank of India, Urjit Patel,
and Economic Affairs secretary, Shaktikanta Das explained in a press conference that
one purpose of the action was to fight terrorism funded by counterfeit notes. While
the supply of notes of all denominations had increased by 40 percent between 2011
and 2016, the Rs500 and Rs1,000 banknotes increased by 76 percent and 109 percent,
respectively, owing to forgery. They said that forged cash was used to fund terrorist
activities against India and that the demonetization had a counter-terrorism purpose.

Patel also informed that the decision had been made about six months ago, and the
printing of new banknotes of denomination Rs500 and Rs2,000 had already started.
However, only the top member of the government, security agencies and the central
bank were aware of the move. But media had reported in October 2016 about the

9
 introduction of Rs2,000 denomination well before the official announcement by RBI.
This statement has led to much debate, because the Reserve Bank governor six
months before the announcement was RaghuramRajan, while the new banknotes have
the signature of the newly appointed governor, Urjit Patel.

2) GOVERNMENTREGULATION

The Specified Bank Notes ordinance, 2016 was issued by the Government of India on
28 December 2016 ceasing the liability of the government for the banned bank notes,
and also imposing a fine up to Rs10,000 or five times the amount of the face value of
the bank notes, whichever is higher, for people transacting with them after 8
November 2016; or holding more than ten of them after 30 December 2016.

The ordinance also provided for the exchange of the bank notes after December 30 for
non-resident citizens and others on a case by case basis. However, Petrol, CNG and
gas stations, government hospitals, railway and airline booking counters, state-
government recognized dairies and ration stores, and crematoriums were allowed to
accept the banned Rs500 and Rs1,000 bank notes until December 2, 2016.

3) EXCHANGE OF OLD NOTES

People gathered at ATM of all banks to withdraw cash following deposit of

demonetized currency notes in bank on 15 November 2016.

The Reserve Bank of India gave fifty days until 30 December 2016 to deposit the
demonetized banknotes as credit in bank accounts. The banknotes could also be
exchanged over the counter of bank branches up to a limit that varied over the days:

Initially, the limit was fixed at Rs4,000 per person from 8 to 13 November.
This limit was increased to Rs4,500 per person from 14 to 17 November.
The limit was reduced to Rs2,000 per person from 18 November.
All exchange of banknotes was abruptly stopped from 25 November 2016.

4) FACTS AND FIGURES

Up to 97% of the demonetized bank notes have been deposited into banks which have
received a total of Rs14.97 trillion ($220 billion) as of December 30 out of the Rs15.4

10
 trillion that was demonetized. This is against the government's initial estimate that
Rs3 trillion would not return to the banking system.

Of the Rs15.4 trillion demonetized in the form of Rs500 and Rs1000 bank notes of the
Mahatma Gandhi Series, Rs9.2 trillion in the form of Rs500 and Rs2000 bank notes
of the Mahatma Gandhi New Series has beenagain circulate as of 10 January 2017,
two months after the demonetization.

5) WITHDRAWAL LIMITS

Cash withdrawals from bank accounts were restricted to Rs10,000 per day and
Rs20,000 per week per account from 10 to 13 November. This limit was increased to
Rs24,000 per week from 14 November 2016.

A daily limit on withdrawals from ATMs was also imposed varying from Rs2,000 per
day till 14 November, and Rs2,500 per day till 31 December. This limit was increased
to Rs4,500 per day from January 1, and again to Rs10,000 from January 16, 2017.
RBI increased the withdrawal limit from Savings Bank account to Rs 50,000 from the
earlier Rs 24,000 on February 20, 2017 and then on March 13, 2017, it removed all
withdrawal limits from Savings Bank Accounts.

6) EXCEPTIONS

Under the revised guidelines issued on 17 November 2016, families were allowed to
withdraw Rs250,000 for wedding expenses from one account provided it was KYC
compliant. The rules were also changed for farmers who are permitted to withdraw
Rs25,000 per week from their accounts against crop loans.

11
 CHAPTER III

IMPACT OF DEMONETIZATION

1. IMPACT OF DEMONETIZATION ON INDIAN CURRENCY

2. SECTORAL IMPACT OF DEMONETIZATION

12
3.1 IMPACT OF DEMONETIZATION ON INDIAN

CURRENCY

Demonetization is a generations memorable experience and is going to be one of the

economic events of our time. Its impact is felt by every Indian citizen. Demonetization affects
the economy through the liquidity side. Its effect will be a telling one because nearly 86% of
currency value in circulation was withdrawn without replacing bulk of it. As a result of the
withdrawal of Rs 500 and Rs 1000 notes, there occurred huge gap in the currency
composition as after Rs 100; Rs 2000 is the only denomination. Absence of intermediate
denominations like Rs 500 and Rs 1000 will reduce the utility of Rs 2000. Effectively, this

13
will make Rs 2000 less useful as a transaction currency though it can be a store value
denomination. To begin with, demonetization has often been used a tool to cut down hyper
inflation. We, on the contrary, were running smooth on Inflation and for that matter, were the
fastest growing economy in the world. In last few days there has been quite a lot of debate on
demonetization- one of the biggest criticisms being that the implementation has been quite
poor and has caused a lot of inconvenience to the common man.

3.1.1Demonetization will hit the economy

The demonetization of the 500 rupee note and the 1,000 rupee note the two highest
currency denominations available in India will likely hit the economy hard in the short term.
The surprise move is expected to grind the consumption activity in the Indian economy to a
virtual halt. The service sector, which dominates economic activity and involves a major of
cash transactions, will likely be hit the hardest.

Indias economic growth

Growth in the Indian economy remained solid in the quarter from April to June 2016.
In India, a financial year begins in April and ends in March of the following year. The
previously mentioned quarter is the first quarter of fiscal 20162017. During that
period, the GDP (gross domestic product) rose 7.1%, while the GVA (gross value
added) rose 7.3%.
The fall in economic activity due to demonetization could last from two to three
quarters. As a result, GDP and GVA growth in the quarters from September to
December 2016 and January to March 2017 could be significantly lower than
previous years. Some bounce back should be seen in the first quarter of fiscal 2017

14
 2018. In the medium term, the Indian economy can grow considerably after curbing
the debilitation caused by counterfeit money and an increase in economic activity.

3.1.2The Impacts of Demonetization on Indian Economy

Demonetization technically is a liquidity shock; a sudden stop in terms of currency

availability. It creates a situation where lack of currencies jams consumption, investment,
production, employment etc. In this context, the exercise may produce following short
term/long term, consumption/investment, and welfare/growth impacts on Indian economy.
The intensity of demonetization effects clearly depends upon the duration of the liquidity
shocks.
Following are the main impacts

1. Demonetization is not a big disaster like global banking sector crisis of 2007; but at the
same time, it will act as a liquidity shock that disturbs economic activities.
2. Liquidity crunch (short term effect)
Liquidity shock means people are not able to get sufficient volume of popular denomination
especially Rs 500. This currency unit is the favorable denomination in daily life. It
constituted to nearly 49% of the previous currency supply in terms of value. Higher the time
required to resupply Rs 500 notes, higher will be the duration of the liquidity crunch. Current
reports indicate that all security printing presses can print only 2000 million units of Rs 500
notes by the end of this year. Nearly 16000 million Rs 500 notes were in circulation as on end
March 2016. Some portions of this were filled by the new Rs 2000 notes. Towards end of
March approximately 10000 million units will be printed and replaced. All these indicate that
currency crunch will be in our economy for the next four months.

3. Welfare loss for the currency using population

Most active segments of the population who constitute the base of the pyramid use
currency to meet their transactions. The daily wage earners, other laborers, small
traders etc. who reside out of the formal economy uses cash frequently.
These sections will lose income in the absence of liquid cash. Cash stringency will
compel firms to reduce labour cost and thus reduces income to the poor working

15
 class. There will be a trickle up effect of the liquidity chaos to the higher income
people with time.

4. Consumption will be hit

When liquidity shortage strikes, it is consumption that is going to be adversely

affected first. Consumption Production Employment Growth Tax
revenue

5. Loss of Growth momentum

India risks its position of being the fastest growing largest economy: reduced
consumption, income, investment etc. may reduce Indias GDP growth as the liquidity
impact itself may last three -four months.

6. Impact on bank deposits and interest rate

Deposit in the short term may rise, but in the long term, its effect will come down.
The savings with the banks are actually liquid cash people stored. It is difficult to
assume that such ready cash once stored in their hands will be put into savings for a
long term.
They saved this money into banks just to convert the old notes into new notes. These
are not voluntary savings aimed to get interest. It will be converted into active
liquidity by the savers when full-fledged new currency supply takes place. This means
that new savings with banks is only transitory or short-term deposit. It is not
necessary that demonetization will produce big savings in the banking system in the
medium term.
Most of the savings are obtained by biggie public sector banks like the SBI. They
may reduce interest rate in the short/medium term. But they can't follow it in the long
term.

7. Impact on black money

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 Only a small portion of black money is actually stored in the form of cash. Usually,
black income is kept in the form of physical assets like gold, land, buildings etc.
Hence the amount of black money countered by demonetization depends upon the
amount of black money held in the form of cash and it will be smaller than expected.
But more than anything else, demonetization has a big propaganda effect. People are
now much convinced about the need to fight black income. Such a nationwide
awareness and urge will encourage government to come out with even strong
measures.
Black money stored in the form of Rs 500 and Rs 1000 notes will be taken out of our
system. As predicted by ICICI Securities Primary Dealership the government's plan
to scrap Rs500 and Rs1,000 notes will uncover up to Rs4.6 lakh crore in black
money.

There are three major types of Black money:-

a).Money that is stashed in abroad:-i.e. tax havens like Panama

b) Money that in country that in higher currencies:-

Dollar, pounds etc(Less in volume so easier to hide. Also, once you would sell them off you
get inflation indexed prices). New 2000 currency will, on the contrary, help this lot because
they will have to carry lesser volume of currency once they exchange.

c).Unaccounted money stashed under mattress or elsewhere to evade tax.

1 and 2 are off course out of the ambit of this move. Different sources claim that they
are as much as 90% of the total black money. For a fair argument, let's just assume it
to be somewhere around 85%. So 15 of the total black money is in question here.
Calculate it all and you would reach to a conclusion that only a merge percentage of
the total black money has gone inoperative; possibly

8. Impact on counterfeit currency

The real impact will be on counterfeit fake currency as its circulation will be checked
after this exercise. Demonetization as a cleaning exercise may produce several good
things in the economy.

17
 At the same time, it creates unavoidable income and welfare losses to the poor
sections of the society who gets income based on their daily work and those who
doesnt have the digital transaction culture.
Overall economic activities will be dampened in the short term. But the
immeasurable benefits of having more transparency and reduced volume of black
money activities can be pointed as long term benefits.

9. Terror funding

Fake Indian Currency Notes (FICN) network will be dismantled by the

demonetization measures. Taking out 500 and 1000 rupee notes out of circulation
will have a lasting impact on the syndicates producing fake Indian currency notes,
thus affecting the funding of terror networks in Jammu and Kashmir, North-eastern
states and Naxalite hit states.

10. Real estate may see significant course correction

The demonetization decision is expected to have far reaching effects on real estate.
Resale transactions in the real estate sector often have a significant cash component
as it reduces incidence of capital gains tax. Black money was responsible for sharp
appreciation of properties in metros; real estate prices may now see a sharp drop.

11. Political parties in crisis ahead of polls

With nearly five state elections in 2017, demonetization has stunned political parties.
Especially, in large states like Punjab and Uttar Pradesh, cash donations are a huge
part of "election management".
In one stroke, big parties will find themselves hamstrung as cash hoards are often
undeclared money.

12. Moving towards digital payments

Demonetization will likely result inpeople adopting virtual wallets such as
Pay tm, Ola Money etc.This behavioral change could be a game changer for India.

13. Temporary chaos and confusion

18
 Public will face minor problem for a few days owing to the scarcity of lower
denomination notes in the system.
14. Economic Impact and Social Impact

There would be a big social inclusion in banking system, enabling them to avail
banking services. The technology will simplify the banking transactions and bring
banks to homes. Minimum wages would be paid.
Currently unorganized sector including labors and house maid are not paid minimum
wages. The compulsory payment through banks would ensure that they are paid
minimum wages.

15. Some of the sectoral impacts

While sectors with linkages to the unorganized economy are likely to be affected,
technology and financial services are expected to gain in the medium to long term.
On a sectoral basis, the commodities and agricultural sector, including the market
for consumer durables and non-durables is expected to feel the heat.
In the short to medium-term, large denomination purchases will likely be made via
electronic purchases rather than through brick and mortar outlets. This will impact
the retail sector adversely. The real estate sector is likely to see a significant
negative impact in the medium- to long-term, particularly in the repurchase market.
There are expectations of a revaluation of current real estate transactions across the
board representing possible losses to players in the sector.
The luxury goods market is also likely to get affected as this move represents an
erosion of real wealth to a large number of people. Areas of sub-sectoral impact will
be felt in luxury cars, SUVs, gems, jewelers, gold and high-end branded products.
On the positive side, there is likely to a reset of spending patterns as this move
represents indirectly a significant push towards a cashless economy. Businesses in
the fin-tech sector, including payment banks, mobile wallets, electronic transfer
providers, etc., are expected to see gains.

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3.1.3.Aside From Eliminating Black Money And Counterfeit

Currency, One Of The Most Significant And Welcome Impacts

Would Be This:

Cashless Economy

The gradual transition towards digitization and a cashless economy will definitely
help curb corruption in the long run. The increased transparency and record of
transactions will make it considerably difficult to hold black money and carry out
under-the-table deals. The added convenience of using digital payment solutions and
virtual wallets cant be ignored either.
Automated expense reporting solutions, coupled with their Visa and MasterCard
integrated credit cards, have gained significant traction over the past few days for
their complete- food, travel, medical and ad-hoc, cash free solutions. When the
government is doing its part to curb corruption, switching to these cashless solutions
is the least of the contributions we can make.

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 As most of the unaccounted wealth is particularly widespread in real estate sector, the
central governments latest decision on note ban is expected to cause problems for
developers. As there will be the liquidity stress on them, they may slow down the
construction works and it would eventually increase the number of residential projects
getting delayed on its completion.
The government has pulled off arguably the most significant reform measure in its
tenure. While this expeditious move to boldly counter the black money and parallel
economy threat is likely to have significant repercussions, importantly, this effort will
have a visible impact on how the current government's policies are perceived in
international circles of economic power. Most of the macroeconomic impact will be
felt in the short-term, though there are larger implications in the medium- to long-
term.

3.2 SECTORAL IMPACT OF DEMONETIZATION

TOP EIGHT SECTORS:

AUTO & AUTO ANCILLARY

CONSUMPTION
BANKING
NBFC & FINANCE
HOSPITALITY & TOURISM
INFRASTRUCTURE
OIL & GAS
REAL ESTATE
OTHER

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3.2.1) AUTO AND AUTO ANCILARY

The automotive industry in India is one of the largest in the world with an annual production
of 23.37 million vehicles in FY 2014-15, following a growth of 8.68 per cent over the last
year. The automobile industry accounts for 7.1 per cent of the country's gross domestic
product (GDP).

1) AUTOMOBILE

22
 Sales of passenger vehicles increased by 16.7 per cent to 258,000 units in August
2016 driven by better-than-expected monsoon and strong buying sentiment. Sales of
commercial vehicles grew by 1.53 per cent to 52,996 units.
The two-wheeler industry also performed well. Motorcycle sales grew 22 per cent to 1
million units, while overall two- wheeler sales grew 26.3 per cent to 1.64 million
units.
Two wheelers accounted for the largest share of exports at 69.4 per cent in FY15.
Passenger vehicles comprised a sizeable 16.7 per cent of overall exports. Exports of
three wheeler vehicles registered around 11.1 per cent share in exports in FY15.
Alternative fuel has the potential to provide for the country's energy demand in the
auto sector as the CNG distribution network in India is expected to rise to 250 cities in
2018 from 125 cities in 2014. Also, the luxury car market could register high growth
and is expected to reach 150,000 units by 2020.

PROS:-

Passenger vehicle: - Short term impact due to purchase deferment; demand will
revive in medium term.
Tractors: -Demand will materially impacted; plus questionable trade practice like
over-invoicing to moderate.
Due to decrease in bank lending rates, the sales might be boosted as the bike and Car
EIM, s become much more affordable.

CONS:-

Two wheeler:- High impact on two wheeler sales due to the most % of transaction are
in cash and remains are in digitalize way by paying loans EMI due to transaction
backed is lower .
Significant impact due to wealth deterioration and decline in rural transaction (cash
based)
Commercial vehicles: - Negatively impacted due to higher % of sales of 2 nd hand
vehicles in cash based transaction.

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3.2.2) CONSUMPTION:

Indian consumer segment is broadly segregated into urban and rural markets, and is attracting
marketers from across the world. The sector comprises of a huge middle
Class, relatively large affluent class and a small economically disadvantaged class, with
spending anticipated to more than double by 2025. India stood second among all nations in
the global consumer confidence index with a score of 128 points for the quarter ending June
2016, after Philippines (132).

MARKET SIZE:-

24
 The Indian consumer sector has grown at an annual rate of 5.7 percent between FY
2005 to FY 2015. Annual growth in the Indian consumption market is estimated to be
6.7 per cent during FY 2015-20 and 7.1 per cent during FY 2021-25.

The FMCG sector has grown at an annual average of about 11 percent over the last
decade.

The overall FMCG market is expected to increase at (CAGR) of 14.7 per cent to
touch US $ 110.4 billion during 2012-2020, with the rural FMCG market anticipated
to increase at a CAGR of 17.7 percent to reach US$ 100 billion during 2012-2025.

Food products are the leading segment, accounting for 43 percent of the overall
market. Personal care (22 per cent) and fabric care (12 per cent) come next in terms of
market share.

PROS:-
Consumer staples: the move should benefit organized retail and hamper the market
for local counterfeit goods.
Consumer durables: sales through online retail should pick up relatively
Consumer discretionary: time lower rates should provide a buffer in the medium
term.

CONS:-
Consumer staples: Given the need based demand and small purchase tickets, the
impact on demand would be muted.
Consumer durables: Sales likely to be hampered over short-term, especially sales
through unorganized channels as cash purchases (~70-75% of the overall sales) take a
hit
Consumer discretionary: The adverse wealth effect will likely hurt higher end
discretionary demand.
Liquor: Most of the purchases by retailers are through cash which may bring down
volume in the near term.

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3.2.3) BANKING

The Indian banking system consist of 26 public sector bank ,25 private sector, 43
foreign bank ,56 regional rural bank,1589 urban co-operative,93550 rural cooperative bank,
in addition to cooperation credit institute . Indian banking sector recently witnessed the roll
out of innovative banking model like payment and small finance banks. The central bank
recently granted in-principle approval to 11 payment bank and 10 small finance bank in FY
2015-16.

MARKET SIZE
Total money supply increased at a CAGR of 11.14 per cent during FY 06 16.
Between FY0616, narrow money supply (M1) rose at a CAGR of 7.69 per cent to
US$ 392.8 billion, broad money supply (M2) increased at a CAGR of 6.49 per cent to

26
 US$ 395.3 billion and money supply (M3) grew at a CAGR of 11.14 per cent to US$
1.8 trillion by the end of October15.
Time deposits with banks have shown highest average growth of 12.9 per cent during
FY20062016*, and stood at US$ 1.44 trillion.

KEY INITIATIVES BY THE GOVERNMENT

In July 2016, the government allocated Rs 22,915 crore (US$ 3.41 billion) as capital
infusion in 13 public sector banks.
To reduce the burden of loan repayment on farmers, a provision of Rs 15,000 crore
(US$ 2.2 billion) has been made in the Union Budget 2016- 17 towards interest
subvention.
Under Pradhan Mantri Jan DhanYojna (PMJDY), 250.5 million accounts have been
opened and 192.2 million Rupay debit cards have been issued as of October 12, 2016.
These new accounts have mustered deposits worth almost Rs 44,480 crore (US$ 6.67
billion).
In September 2015, RBI approved 10 applicants to set up small finance banks , this
approval will be valid for 18 months to comply with the guidelines and conditions
stipulated by RBI. After fulfillment of requirements, RBI would grant banking license
to the selected applicants.
PROS:-
Increased share of savings moving to banks; high CASA ratio (lower cost of funds)
Lower bond yields resulting in high treasury gains (particularly PSU banks)
Governments move to remove higher-value banknotes from circulation would lead to
a surge in deposits, allowing lenders to eventually lower lending rates and lower costs
to service the sectors debt.
Paradigm shift towards cashless economy.
CONS:-
With any sharp infusion of deposits and relatively limited avenues to lend, the credit
deposit ratio for banks would become unfavorable, and thus impact margins.

27
 Negative from credit growth perspective and asset quality challenges (banks with high
SME exposure)
Reduction in deposit interest rate due to high liquidity.

3.2.4) NBFC AND FINANCE

There are 11,842 Non-Banking Financial Companies (NBFCs) registered with the
Reserve Bank of India out of which a lion's share of 98% is non-deposit accepting with the
balance 2% being deposit accepting NBFCs. The major NBFCs in India have their relative
specializations, for e.g. HDFC (mortgage loans), Mahindra Finance (agricultural loans),
Power Finance Corporation (power financer) & Shriram Transport Finance (auto loans)
MARKET SIZE

Micro finance and mortgage/SME segments continued to register robust growth,

while a steady revival in the commercial vehicle credit, especially new CVs, gold
loans and passenger vehicle segments supported overall growth.
The banking system continues to remain the primary source of funding for retail-
focused NBFCs, accounting for close to 41% of the total borrowings as on June 30,
2016. The share of funding from long term debentures accounted for 34% of NBFC
borrowings against 33% in March 2015, while the share of CP borrowings was 12%
against 10% in March 2015.

28
 Return on average assets (excluding one-time gains and captive financiers) for retail
NBFCs improved to 1.8% (based on trailing 4 quarters ended June 2016) from about
1.7% in March 2016 as the interest spreads widened with declining funding costs.

KEY INITIATIVES BY THE GOVERNMENT

100 per cent foreign direct investment (FDI) allowed in 'other financial services'
carried out by NBFCs under government approval route.
Trusts of ARC and securitization trusts to be tax transparent and abolishment the
dividend distribution tax (DDT) on distribution by trusts of ARC and securitization
trusts, thus embracing global best practices.

PROS:-
Gold Finance: Positive in medium term Near term disbursements to get hit as high
cash dealing; however, ~75% of gold lending is from unorganized segment which will
gradually shift to organized players.
Micro finance: Positive in medium term ~70% transactions done in cash; Near term
disbursements/collections to get hit; However, positive in medium to long term as
borrowers shift to bank accounts.

CONS:-
Housing Finance: Negative: LAP/developer loans may see increased delinquencies;
underlying demand slowdown to affect credit growth.
Auto Finance: Negative: 60% to 70% transactions are done in cash; resale values
likely to come down for vehicles; Asset quality issues to worsen.
Asset Finance: Negative: As large chunk of cash based business of asset financing
suffers a setback.

29
3.2.5) HOSPITALITY AND TOURISM
The Indian tourism and hospitality industry has emerged as one of the key drivers of
growth among the services sector in India. The industry is expected to generate 13.45 million
jobs across sub-segments such as restaurants, hotels and travel agents/ tour operators.
MAKKET SIZE:-
Increase in domestic disposable incomes has continued to support the growth of
domestic and outbound tourism. Total outbound trips increased by 8.7 per cent to 19.9
million in 2015. Inbound tourist volume grew at a Compound Annual Growth Rate
(CAGR) of 6.8 per cent during 2010-15.
Foreign Tourist Arrivals (FTAs) in India increased 11.8 per cent year-on-year to
670,000 tourists in August 2016, while Foreign Exchange Earnings (FEEs) from
tourism increased 13.1 per cent year-on-year to Rs 12,903 crore (US$ 1.92 billion).
Tourist arrivals in India on e-Tourist Visa (e-TV) grew by 196.6 per cent year-on-year
to 66,097 tourists in August 2016, attributable to the introduction of e-TV for 150
countries as against the earlier coverage of 113 countries.
Online hotel bookings in India are expected to double by 2016 due to the increasing
penetration of the internet and smart phones.
Total contribution by travel and tourism sector to Indias GDP is expected to increase
from US$ 136.3 billion in 2015 to US$ 275.2 billion in 2025. Travel and tourism is

30
 the third largest foreign exchange earner for India. In 2014, the country managed
foreign exchange earnings of USD 19.7 billion from tourism.
PROS:-
Major gain for online forex marketplace companies like Book My Forex that have
introduced online forex and have been promoting plastic money (forex travel cards)
against online or electronic payments.
CONS:-
Hotels: Demand to be impacted due to slowdown in Domestic Travel. Near Term
Impact on Corporate Travel whereas Inbound demand to remain unaffected.
Tour operators: Domestic Leisure Travel Severely impacted as majority of spending
is in cash.
Corporate Travel: There may be temporary slowdown in corporate travel due to cash
crunch.
Inbound: Inbound travel to remain unaffected.
Outbound: Outbound travel through unorganized players impacted as foreign
exchange usage abroad is mostly in cash.

3.2.6) INFRASTRUTURE
Infrastructure sector is a key driver for the Indian economy. Mr Nitin Gadkari,
Minister of Road Transport and Highways, and Shipping, has announced the governments
target of Rs 25 trillion (US$ 376.53 billion) investment in infrastructure over a period of three
years, which will include Rs 8 trillion (US$ 120.49 billion) for developing 27 industrial
clusters and an additional Rs 5 trillion (US$ 75.30 billion) for road, railway and port
connectivity projects.
Infrastructure sector includes power, bridges, dams, roads and urban infrastructure
development. In August 2016, India jumped 19 places in World Bank's Logistics Performance
Index (LPI) 2016, to rank 35th amongst 160 countries.

MARKET SIZE:-
The Government of India is planning to boost regional connectivity by setting up 50
new airports over the next three years. It has rolled out stuck projects worth Rs 4 lakh
crore (US$ 58.69 billion) in the past six months.
The government plans to invest over Rs 7,000 crore (US$ 1.04 billion) in FY 2016-17
to develop its network in the northeastern region for better connectivity.
KEY INITIATIVES BY THE GOVERNMENT

31
 In the Budget 2015-16, the capital outlays for roads, and railways have been increased
by Rs 140.3 billion (US$ 2.05 billion) and Rs 100.5 billion (US$ 1.47 billion)
respectively.
Government of India plans to launch the National Infrastructure Investment Fund
(NIFF) with an initial corpus of at least Rs 40,000 crore (US$ 5.87 billion).
The NITI Aayog has instructed central public sector units to release 75 per cent of the
amount due to construction contractors and concessionaires of government projects,
which is expected to release over Rs 40,000 crore (US$ 6.02 billion) for projects that
are under dispute.
The Ministry of Urban Development has approved an investment of Rs 19,170 crore
(US$ 2.81 billion) for improving basic urban infrastructure in 474 cities in 18 states
and Union Territories (UTs) under Atal Mission for Urban Rejuvenation and
Transformation (AMRUT).

PROS:-
EPC/Construction: Most of these projects have big ticket sizes and revenue is from
larger corporate houses and government authorities, which do bank transaction.
Therefore, due to reduction in unorganized sector in the market, their revenues are
likely to increase.
CONS:-
EPC/ Construction: For small contractors, due to cash crunch there will be some
disruption in medium term.
Toll collection: which are mainly done in cash, may see some hiccups in short term.
Building material: Likely to be negatively impacted as the underlying real estate
demand (~60-65% of consumption) will be severely impacted due to curtailment of
black money. Large part of transactions done in cash in segments like paints, hence
likely to be negatively impacted.

32
3.2.7) OIL AND GAS
The oil and gas sector is among the six core industries in India and plays a major role
in influencing decision making for all the other important sections of the economy. Domestic
refiners import of crude oil increased 9.1 per cent year-on-year to around 18.81 million
metric tons during August 2016.

MARKET SIZE:-
Total fuel consumption is expected to grow around 56 per cent in FY 201617 and
thereafter, while consumption of gasoline is expected to grow around 910 per cent
over the medium term, supported by robust passenger vehicle sales amid low crude oil
prices.
India is the fourth largest Liquefied Natural Gas (LNG) importer and accounts for 5.8
per cent of the total global trade.
The country's gas production is expected to touch 90 Billion Cubic Metrecs (BCM) in
2040 from 35 BCM in 2013. Gas pipeline infrastructure in the country stood at 15,808
km in December 2015.
According to data released by the Department of Industrial Policy and Promotion
(DIPP), the petroleum and natural gas sector attracted FDI worth US$ 6.67 billion
between April 2000 and March 2016.

PROS:-
Temporary pickup in demand due to significant pre-buying of auto fuels.

33
 Refiners are to benefit from robust refining margins, capacity expansions and higher
fuel marketing margin.
CONS:-
Over medium term, demand, especially for personal transportation could be somewhat
negatively impacted due to high proportion of cash transactions
City Gas: Largely unexpected, the demand for CNG might get slightly hurt where
cash transactions are high.

3.2.8) REAL ESTATE

The real estate sector is one of the most globally recognized sectors. In India, real
estate is the second largest employer after agriculture and is slated to grow at 30 per cent over
the next decade. The real estate sector comprises four sub sectors - housing, retail, hospitality,
and commercial. The growth of this sector is well complemented by the growth of the
corporate environment and the demand for office space as well as urban and semi-urban
accommodations. The construction industry ranks third among the 14 major sectors in terms
of direct, indirect and induced effects in all sectors of the economy.

MARKET SIZE
The Indian real estate market is expected to touch US$ 180 billion by 2020. The
housing sector alone contributes 56 per cent to the country's Gross Domestic Product
(GDP).
In the period FY 2018-2020, the market size of this sector is expected to increase at a
Compound Annual Growth Rate (CAGR) of 11.2 per cent.
Retail, hospitality and commercial real estate are also growing significantly,
providing the much needed infrastructure for India's growing needs.
Private Equity (PE) investments by domestic and international investors in the Indian
realty market declined 30 per cent year on year to US$ 2.5 billion across 48 deals
during Jan Sep 2016.
The construction development sector in India has received Foreign Direct Investment
(FDI) equity inflows to the tune of US$ 24.19 billion in the period Apr 2000 Mar
2016.

34
KEY INITIATIVES BY THE GOVERNMENT
Indias Prime Minister Mr. Narendra Modi approved the launch of Housing for All by
2022.
Under the Sardar Patel Urban Housing Mission, 30 million houses will be built in
India by 2022, mostly for the economically weaker sections and low-income groups,
through public-private-partnership (PPP) and interest subsidy.
In August 2015, the Union Cabinet approved 100 Smart City Projects in India.
The Government has also raised FDI limits for townships and settlements
development projects to 100 per cent.
Real estate projects within the Special Economic Zone (SEZ) are also permitted 100
per cent FDI.
In Union Budget 2015-16, the government allocated US$ 3.72 billion for housing and
urban development.
PROS:-
Overall decrease in inflation due to low living cost.
Positive in long term: demonetization coupled with Real Estate Regulation Act,
Benami Act and GST, will transform RE sector in longer term. Key positives expected
- increased transparency, improved investor confidence, better access to funding,
higher FDI likely.
Higher revenue for government in terms of higher registration cost.
CONS:-
Greater impact on small builders and in specific cities / (Tier 2/3 cities, NCR etc.) /
micro markets where cash dealing was more prevalent. Resale properties impacted
more than primary sales.
Organized builders may also face demand slowdown in near term. Another view is, if
supply of resale properties declines due to price crash, it may favorably impact
primary sales.
Registered prices in residential may go up to adjust for cash component Execution of
ongoing projects will be affected, and some developers may face serious fund crunch.

35
3.3 DEMONITISATION BENEFITS AND SHORTCOMINGS

3.3.1 BENEFITS OF DEMONETIZATION

In the backdrop of the RBI's report stating that 99 per cent of the demonetized cash had
come back into the banking system, the government today released data to substantiate its
claim that note ban has achieve all its objective.

1. INDIAS HIGHEST EVER DETECTION OF BLACK MONEY

Scrutiny of suspected 18 lakh accounts done
Cash deposits worth Rs 2.89 lakh crore under investigation
Advance data analytics tools identified 5.56 lakhs new suspect cases
4, 73,003 suspicious transactions detected
Undisclosed income worth Rs. 29,213 crore detected and admitted.
Black money worth Rs 16,000 crore did not return post demonetization
21 per cent reduction in currency in circulation

2. UNPRECEDENTED INCREASE IN TAX COMPLIANCE

36
 56 lakh new tax payers added
Number of returns filed increase 24.7 per cent compared to 9.9 per cent in previous
year
Advance tax collections of personal income tax grow at 41.79 per cent over same
period of last year
Personal income taxes under self-assessment tax grow at 34.25 per cent over same
period last year.

3. CLEANSING INDIA'S FINANCIAL SYSTEM

Transactions of more than three lakh suspected shell companies under the radar* 2.1
lakh shell companies de-registered
Around 450 companies delisted and 800 untraceable companies to be further delisted
More than 400 benami transactions identified and market value of properties attached
more that Rs 800 crore

4. SLEW OF BENEFITS TO THE COUNTRY

Deposits in the banking system increased around Rs 3 lakh crore.

Additional liquidity helped reduce interest rates by 100 basis points.
Digital payments increase by 56 per cent from 71.27 crore transactions in October
2016 to 111.45 crore transaction in May, 2017.
More than one crore workers added to EPF and ESIC system post-demonetization.
Bank accounts opened for about 50 lakh workers to get their wages credited directly
in their accounts.

3.3.2 SHORTCOMINGS OF DEMONETIZATION

Denouncing demonetization as a failure just after 10 months may not be the correct
assessment of its effect on Indian economy. Here are the reasons

Announcing demonetization on November 8 last year, Prime Minister Narendra Modi

listed fighting black money, fake currency and terror funding, and promoting digital
transaction as its objectives.

37
 Demonetization proved to be a major disruption in the Indian economy and brought
great hardship to people who spent hours in the serpentine queue to get Rs 500 and Rs
1,000 notes exchanged or deposited in their bank accounts.

Now, the Reserve Bank of India (RBI) has said in its Annual Report for 2016-17 that
99 per cent of the junked Rs 500 and 1,000 notes have returned to the banking system.
This has led many including Opposition leaders questioning the very logic of
demonetization.

The Opposition has demanded that the government should tender apology for causing
immense pain to people who lost their working hours affecting livelihood and comfort
for exchanging the notes.

An estimated Rs 15.4 lakh crore worth old Rs 500 and Rs 1,000 notes had been
demonetized on November 8. But, return of about 99 per cent demonetized currency
to banks does not necessarily make demonetization a failure. Beyond the political
statements, even those made by Prime Minister Narendra Modi and his ministers,
there are several effects of demonetization that may augur well for the economy in the
long run.

1) GREATER TRACK OF CURRENCY

Before demonetization, a large portion of the specified bank notes (SBN) circulated in
the markets without passing through the banking system. Some estimates suggested
that the volume of such currency notes might have been about 30 per cent of the total
money in circulation.
Demonetization forced people holding Rs 500 and Rs 1,000 notes - almost all the
households did - to deposit them in banks and thus bringing the flow of currency
under greater RBI surveillance. When Rs 500 and Rs 1,000 notes were demonetized,
they formed about 86 per cent of the all notes existing in the country. Now, 99 per
cent of that money can be tracked by the RBI and tax authorities. This is a major
achievement of demonetization.

2) ALL RETURNED MONEY IS NOT WHITE

38
 Return of currency in the banking system has helped the RBI and tax authorities
identify the owner of money. Earlier, a large chunk of money in circulation enjoyed
anonymity. Demonetization has helped identifying the owner
This means those earning more will easily come in the notice of tax authorities. Tax
evasion will become difficult.
The RBI data says that the more than 78 lakh bank accounts reported deposits of over
Rs 5 lakh each during demonetization drive. These accounts did not show such trend
earlier. It is believed that a large number of holders of such accounts evaded tax and
kept money out of banking channels hampering accurate data collection for revenue
and growth estimates.
Also, merely return of money in the banking system does not make it white. To
become one, liable tax must be paid on each penny earned. Money parked in these
accounts is open to scrutiny by tax authorities. Unless due tax is paid, all such money
can't shed its black color.
Issuing a statement following the RBI report, the finance ministry has said that the tax
authorities have found undisclosed income of Rs17,562 crore in post-demonetization.
About Rs 1,003 crore has been seized so far by the Income Tax department on the
basis of deposits made in the bank accounts.
The Income-Tax Directorates of Investigation had identified more than 400 benami
transactions up to May 23, 2017. The market value of properties under attachment is
more than Rs 600 crore.

3) MORE TAXPAYERS
Money trail established as a result of demonetization-induced deposits led to
identification of suspicious transactions of more than 3 lakh registered companies.
These are on the radar of Income Tax authorities, who have, already struck off about 1
lakh companies from the list.
The finance ministry data says that the government has identified more than 37,000
shell companys post-demonetization which was engaged in hiding black money and
hawala transactions. The authorities are tracking them for appropriate action. More
than 160 companies, listed on the exchange platforms, have been suspended from
trading.
This process has resulted in a huge jump in the number of tax payers after
demonetization. Since the Prime Minister announced demonetization, 56 lakh new tax
payers have been added. These people or business entities were earlier evading tax.

39
4) FORMALISATION OF ECONOMY
One of the major drawbacks of India's economy has been a very large informal sector
where money circulation happens outside the banking system. Since money involved
in this sector hardly enters the banking system, it aids evasion of tax and hampers
making an estimate of the value it generated.
Demonetization and later, the GST have helped making Indian economy more formal.
Digital payment got a major boost after demonetization. Cashless transactions are
easily tracked and expand the base of formal economy.
Demonetization led to greater penetration of banking - both population and area wise.
The RBI data shows that post-demonetization, 2.33 crore new bank accounts were
opened under the Pradhan Mantri Jan DhanYojana (PMJDY).
Post-demonetization, detection of fake currency notes also registered an increase.
Compared to previous year, 20.4 per cent more fake currencies were detected after
demonetization.

5) WHAT ELSE?

Demonetization also helped keeping inflation low. With the exception of February and
March, food inflation remained low touching 1.5 per cent in June 2017. The fiscal
year ended up with a subdued inflation of 3.6 per cent in the last quarter staying far
below of the RBI's projection of 5.0 per cent.
Lending rates were also reduced benefiting the borrowers. However, the savings rates
also got slashed which came as a punishment for those opting for good economics.
But, despite the demonetization not achieving the politically stated goals, it would be
too early to call note ban a failure. Its long term effects are yet to be ascertained.
There are signs that demonetization may end up helping Indian economy in the long
run provided the tax authorities and the RBI keep a better track of the money in
circulation.
However, in the short term, the RBI annual report must have come as a major setback
for the government. The reason is pretty simple. On November 8, 2016, there were
1,716.5 crore pieces of Rs 500 and 685.8 crore pieces of Rs 1,000 in circulation,
totaling Rs 15.44 lakh crore. The new currency of almost equal value has been printed
by the RBI.

40
 The RBI spent Rs 7,965 crore in 2016-17 on printing new Rs 500 and Rs 2,000 and
other denomination notes during demonetization. This is more than double cost of
currency printing for the previous year when the RBI spent Rs 3,421 crore on it.

41
 CHAPTER .IV

1. EXPERTS OPINION ON DEMONETIZATION

42
4. EXPERTS' OPINION ON DEMONITISATION

4.1) Mr. Anil Bokil of ArthaKranti Pratisthan

(Believes demonetization is a surgery done without administering anesthesia)

These days ,Anil Bokil happy that Prime Minister Narendra Modi has set in motion
one of the big ideas that ArthaKranti Pratisthan, the Pune-based think-tank he founded
12 years ago, has proposed.

It is a surgery done without administering the patient the dose of anesthesia, Bokil
says about demonetization of the currency notes of Rs500 and Rs1,000.

The Anil Bokil replied currency compression not demonetization. We have

proposed compressing the currency so much that the Rs50 note becomes the highest
denomination in circulation.

We are not saying we go completely cashless. Some cash will have to be there, but
we need to set the bar at Rs50. For a country like us where 70% of the population
survives on just $2 per day, why do we need currency notes upwards of Rs100? asks
Bokil.

The 55-year-old mechanical engineer has been an employee, employer, entrepreneur,

economic theorist, and activist. He has done many things in life and all of them in his
own unique and fundamental way, says Prashant Deshpande, Bokils colleague at
ArthaKranti.

43
 Bokil comes from Latur in Marathwada, the town that in 2015 earned the dubious
distinction of getting its drinking water from an Indian Railways train. Though
ArthaKranti as an organization was registered in 2004, Bokil had started working on
these ideas in 1999.

It was in 1999 that Bokil, a bachelor who calls the universe his family, disassociated
himself from an industrial project he had helped set up to support 100 skilled laborers
of a major automobile plant in Aurangabad who had been fired during the 1994
recession.

Otherwise chatty, Bokil is reluctant to speak about himself and insists several times
during the conversation that it is the people at ArthaKranti Pratishthan and all
Indians themselves, who should be credited with the beginning of this task of
currency compression. It is the campaign that we all started 16 years back and the
essential human gravity of all Indians that has actually set us on the path of total
economic revolution. I am nobody, he says.

Yet, there are reasons why Bokil is a star post 8 November. He is modest when it
comes to claiming credit but Bokil did not shy away from reaching out to the right
powers when it mattered. In 2013, soon after Modi was declared the Bharatiya Janata
Partys (BJPs) prime ministerial candidate, Bokil went to Ahmadabad with his
colleagues and sought to make a small presentation to the would-be-prime minister
about the Artha Kranti proposal.

The office of the then Gujarat chief minister gave Bokil 10 minutes. By the time I
was done, I realized that he had listened to me for 90 minutes. He said nothing after I
had made my presentation, Bokil recalls.

There have been a few follow-up meetings with Modi since then, in 2014, 2015, and
even this year when, as the prime minister, Modi met Bokil with financial services
secretary Hasmukh Adhia.

Before this now-famous meeting with Modi, Bokil had submitted his no taxation
proposal to then BJP president and now Union minister Nitin Gadkari.

44
 The first point of Artha Kranti proposal is a complete withdrawal of existing taxation
system except the customs and import duties. The second point is tax on transactions
routed through a bank, which will be the single point tax deducted at source on the
credit/receiving account only. Third, cash transactions will not attract any tax. And the
fourth point was withdrawal of high-denomination currency notes, Bokil says adding
that Modi has done the fourth thing first. Thats probably his way of doing things.
Nobody among us imagined that there would be a politician who would do this. But
Modi has proved us wrong, Bokil says.

4.2) Dr. Manmohan Singh, Former Prime Minister of India:

45
(Demonetization and GST adversely impacted India's GDP growth)

Former Prime Minister Dr Manmohan Singh on Monday said that the demonetization
and 'hasty' implementation of GST have adversely impacted India's economic growth.
Dr Singh was speaking to CNBC-TV 18 on the country's GDP growth. He said: "Both
demonetization and the GST have had some impact. Both would affect the informal
sector, the small scale sector. The sectors today are responsible for 40 per cent of
GDP."

Dr Singh's statement has come in the backdrop of India's slowest economic growth in
last three years. The country recorded 5.7 per cent GDP growth during April-June.
The previous low of 4.6 per cent was recorded in January-March 2014.

Former Prime Minister put the blame on the demonetization and GST for the current
economic slowdown and said: "The withdrawal of 86 per cent of currency plus GST,
because it has been put on practice in haste, there are lots of glitches which are now
coming out. These are bound to affect the GDP growth adversely." He further said that
the informal and small scale sectors were badly hit by the demonetization.

46
 This is not the first time when Dr Manmohan Singh criticized the Centre's
demonetization move. Soon after the announcement of note ban, the Former Prime
Minister in the Parliament called it an 'organized loot and legalized plunder' that
would bring the GDP growth down by 2 per cent.

"In my opinion that the way the scheme (demonetization) has been implemented will
hurt agricultural growth in our country, will hurt small industry, and will hurt all those
people who are in the informal sector of the economy. And my own feeling is that the
national income, that is the GDP, can decline by about 2 per cent as a result of what
has been done. This is an underestimate," Dr Singh had said.

Earlier in June, Dr Singh had also talked about the decline in the economic growth
and expressed serious concern over the situation, particularly the impact of the growth
slowdown on job creation.

"Private sector investment has collapsed and the economy is running on just one
engine of public spending," he said at the Congress Working Committee meeting.
"The most worrisome aspect of all this is the impact on job creation. Jobs have been
extremely hard to come by for the youth of the nation," he said.

47
4.3) Dr. Raghuram Rajan, Former Governor of Reserve Bank of India
(RBI)

The demonetization of 500 and 1000 rupee notes is something the nation has still not
been able to digest completely. Many people are pro this change and are also
applauding the RBI governor, Urjit Patel for supporting Modis decision to drive out
black money from the economy.

Amidst the current mood of the economy, the rumors about this decision being a
planned move and being in process for around six months has got a lot of people
thinking about how much did the ex RBI governor, Raghuram Rajan contribute to this
movement.

One cannot clearly state whether he had any say or not in that matter, but Raghuram
Rajan has put forward his point of view, which makes it very clear that he does not
support the demonetization policy.

I am not quite sure if what you meant is demonetize the old notes and introduce new
notes instead. In the past demonetization has been thought off as a way of getting
black money out of circulation. Because people then have to come and say "how do I
have these ten crores in cash sitting in my safe" and they have to explain where they
got the money from. It is often cited as a solution. Unfortunately, my sense is the
clever find ways around it.

48
 They find ways to divide up their hoard into many smaller pieces. You do find that
people, who haven't thought of a way to convert black to white, throw it into the
Hundi in some temples. I think there are ways around demonetization. It is not that
easy to flush out the black money. Of course, a fair amount may be in the form of
gold, therefore even harder to catch. I would focus more on the incentives to generate
and retain black money. A lot of the incentives are on taxes.
My sense is the current tax rate in this country is, for the most part, reasonable. We
have a reasonable tax regime, for example, the maximum tax rate on high incomes is
33%, in the US it is already 39% plus State taxes, etc., and it takes it to near 50. We
are actually lower than many industrial countries. Given that, there is no reason why
everybody who should pay taxes is not paying taxes. I would focus more on tracking
data and better tax administration to get at where money is not being declared. I think
it is very hard in this modern economy to hide your money that easily.
He is missed by many, while others believe he is gone for good. Well, for his own,
what else can we say?

49
 CHAPTER.V

SURVEY AND ANALYSIS

50
 PRIMARY RESEARCH DATA
Questions:
1) Gender-wise classification
Gender No. of Respondent % Percentage
Male 38 54%
Female 32 46%
Total 70 100%

Female; 46%; 46.00% Male

Male; 54%; 54.00% Female

Analysis:

Out of the total respondents who shared their experience and opinion towards
demonetization, 46% were female and 54% were male.

51
2) How do you rate the implementation of demonetization in Nov 2016?

Response No. of Respondents % Percentage

Satisfactory 55 79%

Not satisfactory 15 21%

Total 70 100%

Not satisfactory 21% 21.00%

Satisfactory
Not satisfactory

Satisfactory 79% 79.00%

Analysis:

Out of the total respondents, 79% of people were satisfied with implementation of
demonetization.
But 21% of people expressed dissatisfaction with the implementation of
demonetization.

52
3) What difficulties did you face during demonetization?

Response No .of Respondent % Percentage

(multiple choice )
Total respondents : 70
Shortage of cash 46 66%
Long time spend in 37 53%
queue
Loss in business 7 10%
Impact on interest rate 5 7%
Any other 1 1.42%

Shortage of cash; 66%

Long time spent in queue ; 53%

difficulties

Loss in business; 10%

Impact on interest rate ; 7%
Any other; 1%

Analysis:

Majority of the respondents faced problems regarding shortage of cash (66%) and
long time spent in queue (53%).

Other difficulties faced by the people were loss in business (10%) and impact on
interest rate (7%).

4) Was your everyday life affected during demonetization?

Response No. of Respondents % Percentage

Yes 50 71%

53
 No 20 29%

Total 70 100%

NO; 29%; 29.00%

Yes
NO

Yes; 71%; 71.00%

Analysis:

71% of the total number of people surveyed stated that their life was affected due to
demonetization.

Remaining 29% of the respondents didnt get affected by demonetization.

54
5) Do you think government should have introduced new Rs 1000
denomination note instead of Rs 2000 denomination note?

Response No. of Respondents % Percentage

Yes 53 76%

No 17 24%

Total 70 100%

No; 24%; 24.00%

Yes
No

Yes; 76%; 76.00%

Analysis:

76% people support the decision taken by government of introducing new Rs 2000
denomination instead of 1000 denomination.

24% people were not in the favor of the government introducing Rs 2000
denomination note instead of Rs 1000 denomination.

6) Are you in favor of curbing black money through

demonetization?

55
 Response No. of Respondent % Percentage

Yes 55 78.58%

No 15 21.42%

Total 70 100%

Yes; 78.58%

Response

No; 21.42%

Analysis:

Majority of the respondents i.e. 78.58% are in favor of curbing black money through
demonetization.

7) Do you think demonetization has removed black money from

the economic system?

Response No. of Respondent % Percentage

Yes 33 47%

No 37 53%

Total 70 100%

56
 Yes 47% 47.00%
No 53% 53.00%
Yes
No

Analysis:

53% of the respondents are of the opinion that demonetization has cleaned the
economic system by removing black money from the system.

But 47 % people responded that there was no such effect of demonetization on black
money in the economic system.

57
8) Would you like demonetization to occur once in every 10 years
or such intervals to weed out black money?

Response No. of Respondent % Percentage

Yes 50 71.43%

No 20 28.57%

Total 70 100%

No; 28.57%; 28.57%

Yes
No
Yes; 71.43%; 71.43%

Analysis:

71.43% of people are of the opinion that demonetization would be very beneficial for
economy if occurred in every 10 years or such intervals of time.

But 28.57% people are not in favor of demonetization to occur in every 10 years or
such intervals.

9) Do you think demonetization made you more aware about

digital payment and online transactions?

58
Response No. of Respondent % Percentage

Yes 65 93%

No 5 7%

Total 70 100%

No ; 7%; 7.00%

Yes
No

Yes; 93%; 93.00%

Analysis:

Majority of the respondents i.e 93% became more aware about digital payment and
online transactions due to demonetization..

10) Do you think there are other options besides demonetization

to clean economic system & encourage digital transaction?

Response No. of Respondent % Percentage

Yes 62 89%

No 8 11%

59
 Total 70 100 %

No; 11%; 11.00%

Yes
No

Yes; 89%; 89.00%

Analysis:

Majority of the respondents i.e. 89% people believe that there are other option beside
demonetization to clean economic system and encourage digital transaction.

11) Do you think that there is pressure on the RBI governor to

implement such decision taken by the government?

Response No. of Respondent % Percentage

Yes 50 71.43%

No 20 28.57%

Total 70 100%

60
 No; 28.57%; 28.57%
Yes
No
Yes; 71.43%; 71.43%

72 % of total respondents believed that there is pressure on RBI and RBI governor to
implement the decisions taken by government.

28% respondents stated that there is no pressure on RBI and RBI governor to
implement the decision taken by government.

61
12) According to latest news, RBI has stated that 99% of black
money is back into the economy. So do you think demonetization
failed to achieve its aim?

Response No. of Respondent % Percentage

Yes 42 60%

No 28 40%

Total 70 100%

No; 40%; 40.00%

Yes
No
Yes; 60%; 60.00%

Analysis:

60% people think that demonetization failed to achieve its aim because 99 % of
money came back into the economy.

But demonetization has not been completely unsuccessful in achieving its aim was
stated by 40% of respondents.

13) Do you think GDP was affected adversely due to

demonetization?

62
 Response No. of Respondent % Percentage

Yes 62 88.58%

No 8 11.42%

Total 70 100%

Yes; 88.58%

Response

No; 11.42%

Analysis

88.58% respondents believed that GDP got adversely affected due to demonetization.

11.42% of total respondents stated that there was no effect on GDP due to
demonetization.
14) Are you aware of the Artha Kranti philosophy which Mr.Anil
Bokil has advocated?

63
Response No. of Respondent % Percentage
Yes 23 32.9%
No 47 67.1%
Total 70 100%

Yes; 32.90%; 32.90%

Yes
No
No; 67.10%; 67.10%

Analysis:

Only 32.90% respondents were aware about the Artha Kranti philosophy which Mr.
Anikl Bokil had advocated.

67.10% of total respondents were not aware of the Artha kranti philosophy.

15) How frequently do you use mobile wallets like BHIM,

Paytm ,etc?

Response No. of respondent % Percentage

Always 5 7%

Sometimes 30 43 %

64
 Never 35 50 %

Total 70 100 %

Never; 50%

Sometimes ; 43%

Response

Always; 7%

Analysis:

Only 7% of total respondents always use mobile wallet apps like BHIM, Pay TM etc.

43% of respondents sometimes used mobile wallet apps.

However 50% of respondents were not using any mobile wallets. Instead they use
cash, credit/debit cards etc.

16) Are you favor of cashless economy?

Response No. of Respondent % Percentage

Yes 68 97 %

No 2 3%

65
 Total 70 100 %

No; 3%; 3.00%

Yes
No

Yes; 97%; 97.00%

Analysis:

Majority of the respondents i.e. 97% were in favor of cashless economy.

A very small percentage of respondents i.e. 3% were not in favor of cashless

economy.

17) Do you think digitalization will lead to increase in the use of

digital payments system and cashless transaction?

Response No of Respondent % Percentage

Yes 65 93 %

66
 No 5 7%

Total 70 100 %

Response; 7%
Yes
No
Response
Response; 93%

Analysis:
93% of people said yes, digitalization will lead to increase in the use of digital
payment and cashless transaction.

Only 7% of people are said that the digitalization will not lead to increase in digital
payment and cashless transaction.

67
CHAPTER.VI

CONCLUSION

68
CONCLUSION:-

While studying demonetization I observed that it is a tool of curbing black money

from economic system. The impact of demonetization for short term is not very good for the
economy and the country but in the long term demonetization will be a successful tool for the
economy to stop crime, increase the value of currency at international level and move
towards cashless economy.

Demonetization is also helpful for digitalization which helps to improves standard of

living of the country. GDP has been adversely affected due to demonetization, and as per
various experts opinions it is not good for the economy of the country. I have also observed
that the demonetization has not been completely successful in achieving its aim. The impact
of demonetization would have been more beneficial if it was better regulated and well
planned. People faced lots of problem because of the decision taken by the government.
Many people believe that there was a pressure on RBI and the RBI governor to implement
such plan.
Demonetization had tremendous impact on financial sector and other leading sectors
which help in development of the country. The small traders and farmers got affected due to
shortage of cash for a long time. Many small businesses got collapsed and were discontinued
due to decrease in demand and supply and shortage of cash. According to our Honourable
Prime Minister, Narendra Modi, the full benefits of demonetization will be realised in near
future.

69
7. CHAPTER.VII

BIBLIOGRAPHY

70
 WEBLIOGRAPHY

WEBSITES

www.thetimesofindia.in

www.freepressjournal.in

https://www.mca.co.in/images/Demonetisation_MCA.PDF

http://www.iosrjournals.org/iosr-jhss/papers/Conf.DAGCBEDE/Volume-

1/14.%2050-54.pdf

https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetisation

https://timesofindia.indiatimes.com/topic/Demonetisation

www.freepressjournal.in/featured-blog/indias-history-with...from-1946.../988212

http://www.livemint.com/Politics/Ik4lpJUvejB3bIDm0VWKgN/Meet-Anil-Bokil-

the-man-who-gave-Narendra-Modi-the-idea-of.html

http://www.newindianexpress.com/business/2016/nov/10/the-clever-find-ways-

around-demonetisation-raghuram-rajan-said-two-years-ago-1537108.html

http://www.livemint.com/Opinion/gmrbNBXnSD0l1jvnP6nKNM/Why-does-

Raghuram-Rajan-have-to-go.html

http://www.newindianexpress.com/business/2016/nov/10/the-clever-find-ways-

around-demonetisation-raghuram-rajan-said-two-years-ago-1537108.html

71
 http://www.businesstoday.in/current/economy-politics/demonetisation-and-gst-

brought-down-indias-gdp-growth-to-57-per-cent-manmohan-

singh/story/260562.html

8.CHAPTER.VIII
1.ANNEXURE

Dear Sir/madam

Kindly allow me to introduce myself as a T.Y.BMS student who is currently working

on the project DEMONITISATION IN INDIA, Nov-2016 at the D.S.P.Ms
K.V.Pendharkar College with University of Mumbai under the guidance of Prof. Tarun
Kuckian.

I would be grateful if you spare some time to fill the questions given below.
Needless to say that the information provided would be kept confidential.

(To be filled in by the applicant)

1. Name of the Respondent ____________________________________

2. Age _______
3. Gender ________________
4. Profession ____________________________________
5. E-mail id _________________________________
6. Contact No. ______________

7. How would you rate the implementation of demonetization in November

2016?
o Satisfactory o Not satisfactory

8. What difficulties did you face during demonetization?

72
 o Shortage of cash o Loss in business
o Long time spent in queue o Impact on interest rate
o Any Others (Specify) __________________________________

9. Was your everyday life affected during demonetization?

o YES o NO

10. Do you think government should have introduced new Rs. 1000 denomination note
instead of Rs. 2000 denomination note?

o YES o NO
11. Are you in favour of curbing black money through demonetization?

o YES o NO
12.
Do you think demonetization has removed black money from the economic system?
o YES o NO
13. Would you like demonetization to occur once in every 10 years or such intervals to
weed out black money?

o YES o NO
14. Do you think demonetization made you more aware about digital payment and
online transactions?

o YES o NO

15. Do you think there are other options besides demonetization to clean economic
system and encourage digital transactions?

o YES o NO
16.
Do you think that there is pressure on the RBI governor to implement such decisions
taken by the government?

o YES o NO
17. According to the latest news, RBI has stated that 99% of black money is back into
the economy. So do you think demonetization was unsuccessful in achieving its aim?

o YES o NO

73
18. Do you think that GDP was affected adversely due to demonetization?

o YES o NO
19. Are you aware of the ArthaKranti philosophy which Mr. Anil Bokil has advocated?

o YES o NO

20. How frequently do you use mobile wallets like BHIM App, Pay TM etc?

o Always o Sometimes o Never

21. Are you favour of cashless economy?

o YES o NO
22. Do you think digitalisation will lead to increase in the use of digital payment system
and cashless transaction?

o YES o NO

Place __________ Your faithfully,

Date __________ (Signature of the respondent)

74