demonetization effect on middle and lower income group

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A Project Submitted to
University of Mumbai for partial
Completion of the degree of Master
of
Commerce (Banking & Finance)
Under the Faculty of Commerce
By
Akanksha Shashikant Sharma
SEMESTER III
SAP ID: 45210190051
Under the Guidance of
Asst. Prof. Rishika Bhojwani
SVKM’s Narsee Monjee College of Commerce and Economics
(Autonomous)
DECEMBER 2020

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DECLARATION
I the undersigned Ms. Akanksha Shashikant Sharma here by,
Declare that the work embodied in this project work titled
“Impact of Demonetization on Middle and Lower Income Class”
Is own contribution to the research work carried out under the
Guidance of Asst. Prof. Rishika Bhojwani and is a result of my own research
Work and has not been previously submitted to any other University for any other
Degree to this or any other University.
Wherever reference has been made to previous works of others, it has been
Clearly indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been obtained
And presented in accordance with academic rules and ethical conduct.
Signature of the Student Signature of the Guide
ACKNOWLEDGEMENT
Every research big or small is successful largely due to the efforts of a

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Number of wonderful people who have always given their valuable advice or lent a
Helping hand. I sincerely appreciate the inspiration; support and guidance of all
Those people who have been instrumental in making this research a success.
I am grateful to our Principal Dr. PARAG AJAGAONKAR,
For giving me the opportunity
To do this research and providing his immense support throughout
The process of this research.
At this juncture, I am deeply honoured in expressing my sincere thanks to my
research guide Asst. Prof. RISHIKA BHOJWANI, for directing me through the whole
process of my research and providing valuable insights leading to the successful
completion of my research.
My sincere thanks to all the teachers, Assistant Professors and other faculty
members of Narsee Monjee College of Commerce and Economics (Autonomous) for
their kind cooperation and
assistance throughout the research in learning new concepts related to my research.
I would also like to thank all the library and non-teaching staff members of
our college for providing constant support and being
very cooperative and providing invaluable material for my research.
Last but not the least I place a deep sense of gratitude to my family members and
my friends who have been constant source of inspiration during the preparation of
this project work.
TABLE OF CONTENTS
SR. NO CONTENT PAGE NO
COVER PAGE 01
DECLARATION 02
ACKNOWLEDGEMENT 03

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TABLE OF CONTENTS 04
CERTIFICATE 06
1 CHAPTER 01:- INTRODUCTION 08 – 31
(INTRODUCTION, IMPACT, EFFECT OF
DEMONETIZATION ON MIDDLE AND
LOWER INCOME GROUP)
10 – 31
2
CHAPTER 02:- REVIEW OF
LITERATURE AND RESEARCH
DESIGN
32 – 36
2.1 INTRODUCTION TO RESEARCH
DESIGN
32
2.2 TITLE OF THE STUDY 32
2.3 STATEMENT OF THE PROBLEM 32
2.4 REVIEW OF LITERATURE 32
2.5 OBJECTIVE OF THE STUDY 33
2.6 SCOPE OF THE STUDY 33
2.7 HYPOTHESIS 34
2.8 RESEARCH METHODOLOGY 34
2.9 OPERATIONAL DEFINITION 35
2.10 PLAN OF ANALYSIS 35
2.11 LIMITATION OF THE STUDY 36
3
CHAPTER 03:- RESPONDENT’S
PROFILE
37 – 50
3.1 INTRODUCTION TO
DEMONETIZATION
37
3.2 PROFILE OF INDIAN CURRENCY 38
3.3 PROFILE OF REPONDENTS 39
4
CHAPTER 04:- DATA ANALYSIS AND
INTERPRETATION
51 – 78
5 CHAPTER05:- FINDINGS, 79 – 86

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SUGGESTIONS, CONCLUSIONS AND
WEBLIOGRAPHY
SVKM’s Narsee Monjee College of Commerce & Economics
(Autonomous)
CERTIFICATE
This is to certify that Ms. Akanksha Shashikant Sharma
has worked and duly completed her/his Project Work for the degree of Master in
Commerce(Banking& Finance) under the Faculty of Commerce
And her project is titled,
“Impact of Demonetization on middle and lower income class”
Under my supervision.
I further certify that the entire work has been done by the learner under my guidance and
that no part of it has been submitted previously for any Degree or Diploma of any

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University.
It is her own work and facts reported by her/his personal findings and
investigations.
Name and Signature of Guiding Teacher
Date of submission:
External Examiner PRINCIPAL
(Signature & Date) (Signature & Date)
Internal Examiner
(Signature & Date)

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CHAPTER-1
INTRODUCTION
1.1 INTRODUCTIONTO FINANCE
In our present day of economy, finance is referred as the provision of money at the time
when it is required. Every enterprise whether big, small or medium needs finance to carry
on its operation and achieve its targets. In fact, finance is so indispensable that it is rightly
said to be the “Life blood of an enterprise”. Without adequate finance, an enterprise
cannot think of its existence. The study of principles, practices, procedures and problems
concerning financial management of profit making organization engaged in the fields of
industry, trade and commerce is undertaken under the discipline of “BUSINESS
FINANCE”.
1.1.1 BUSINESSFINANCE
Literally speaking, the term ‘business finance’ connotes finance of business activities.
The term business finance is composed of two words business and finance. Thus it is
essential to understand the meaning of these two words, which is the starting point to
develop the whole concept of finance.

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1.1.2 MEANING OF BUSINESS
The word business may be interpreted in one way as “State of being busy”. All human
creative activities relating to the production and distribution of goods and services for
satisfying human needs are known as business. It also includes all those activities which
indirectly help in production and exchange of goods such as transport, insurance, banking
etc.
1.1.3 MEANING OF FINANCE
Finance is referred to as the provision of money at a time when it is required. Finance
refers to the management of flow of money through an organization. It concerns with the
application of skills in the manipulation, use and control of money.
Having studied the meaning of business and finance, we can develop the meaning of the
term business finance as an activity, which is concerned, with the acquisitions of funds,
use of funds and distribution of profits by a business firm. Thus business finance deals
with the acquisition, application, allocation of funds and financial control.
1.1.4 DEFINITIONOF BUSINESS FINANCE
In simple words, business finance can be defined as the process of rising, providing and
administering of all money/ funds to be used in corporate (business) enterprise.
According to Guttmann and Doug all, business can be broadly defined as the activity
concerned with planning, raising, controlling and administering the funds used in the
business
Wheeler defines business finance as “that business activity, which is concerned with the
acquisition and conservation of capital funds in meeting the financial needs and overall
objectives of business enterprise”.
According to Prather and wert “business finance deals with primarily with raising,
administrating and disbursing funds by privately owned business units operating
in non- financial fields of industry.
Business finance, the raising and managing of funds by business organizations.
Planning, analysis, and control operations are responsibilities of the financial
manager, who is usually close to the top of the organizational structure of a firm.
In very large firms, major financial decisions are often made by a finance
committee.

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In small firms, the owner-manager usually conducts the financial operations.
Much of the day-to-day work of business finance is conducted by lower-level
staff; their work includes handling cash receipts and disbursements, borrowing
from commercial banks on a regular and continuing basis, and formulating cash
budgets.
Business Finance means the funds and credit employed in the business. Finance is the
foundation of a business. Finance requirements are to purchase assets, goods, raw materials
and for the other flow of economic activities.
1.2 INTRODUCTIONTO DEMONITIZATION

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On 8 November 2016, the Government of India announced the demonetization of all Rs
500 (US$7.40) and Rs.1000 (US$15) banknotes of the Mahatma Gandhi Series. The
government claimed that the action would curtail the shadow economy and crack down
on the use of illicit and counterfeit cash to fund illegal activity and terrorism. The sudden
nature of the announcement—and the prolonged cash shortages in the weeks that
followed—created significant disruption throughout the economy, threatening economic
output. The move was heavily criticized as poorly planned and unfair, and was met with
protests, litigation, and strikes.
Prime Minister of India Narendra Modi announced the demonetization in an unscheduled
live televised address at 20:00 Indian Standard Time (IST) on 8 November. In the
announcement, Modi declared that use of all Rs.500 and Rs.1000 banknotes of the
Mahatma Gandhi Series would be invalid past midnight, and announced the issuance of
new Rs.500 and Rs.2000 banknotes of the Mahatma Gandhi New Series in exchange for
the old banknotes.
The BSE SENSEX and NIFTY 50 stock indices fell over 6 percent on the very next day
after the announcement. In the days following the demonetization, the country faced
severe cash shortages with severe detrimental effects across the economy. People seeking
to exchange their bank notes had to stand in lengthy queues, and several deaths were
linked to the inconveniences caused due to the rush to exchange cash.
Initially, the move received support from several bankers as well as from some
international commentators. It was heavily criticized by members of the opposition
parties, leading to debates in both houses of parliament and triggering organized protests
against the government in several places across India. The move is considered to have
reduced the country's GDP and industrial production. As the cash shortages grew in the
weeks following the move, the demonetization was heavily criticized by prominent
economists and by world media.
In India’s case, the move has been taken to curb the menace of black money and fake
notes by reducing the amount of cash available in the system. It is also interesting to note
that this was not the first time the Government of India has gone for the demonetization
of high-value currency. It was first implemented in 1946 when the Reserve Bank of India
demonetized the then circulated Rs 1,000 and Rs 10,000 notes. The government then
introduced higher denomination
Banknotes in Rs 1000, Rs 5000 and Rs 10000 in a fresh avatar eight years later in 1954
before the Morarji Desai government demonetized these notes in 1978.
1.2.1 MEANING
 Demonetization is the act of stripping a currency unit of its status as legal tender.
Demonetization is necessary whenever there is a change of national currency. The
old unit of currency must be retired and replaced with a new currency unit. The

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opposite of demonetization is remonetization where a form of payment is restored
as legal tender.
 Demonetization is a radical monetary step in which a currency unit’s status as a
legal tender is declared invalid. This is usually done whenever there is a change of
national currency, replacing the old unit with a new one. Such a step, for example,
was taken when the European Monetary Union nations decided to adopt Euro as
their currency. However, the old currencies were allowed to convert into Euros
for a period of time in order to ensure a smooth transition through demonetization.
Zimbabwe, Fiji, Singapore and Philippines were other countries to have opted for
currency demonetization.
 Denomination is a proper description of a currency amount, usually for coins or
banknotes. Denominations may also be used with other means of payment like
gift cards. For example, five Euros is the denomination of a five euro note.
1.2.2 DEFINITION
 Demonetization for us means that Reserve Bank of India has withdrawn the old
Rs 500 and Rs 1000 notes as an official mode of payment. According to
Investopedia, demonetization is the act of stripping a currency unit of its status as
legal tender.
 Ending something (e.g. gold or silver) as no longer the legal tender of a country.
 Process of removing a currency from general usage, or circulation. Gold was
demonetized in this way when it ceased to be used as an everyday currency.
1.2.3 BACKGROUND
 There are multiple reasons why nations demonetize their local units of currency.
Some reasons include combating inflation, to combat corruption, and to
discourage a cash system. The process of demonetization involves either
introducing new notes or coins of the same currency or completely replacing the
Old currency with new currency.
 The Indian government had demonetized bank notes on two prior occasions—
once in 1946 and then again in 1978—and in both cases, the goal was to combat
tax evasion by "black money" held outside the formal economic system. In 1946,
the pre-independence government hoped demonetization would penalize Indian
businesses that were concealing the fortunes amassed supplying the Allies in
World War II. In 1978, the Janata Party coalition government demonetized
banknotes of 1000, 5000 and 10,000 rupees, again in the hopes of curbing
Counterfeit money and black money.

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 In 2012, the Central Board of Direct Taxes had recommended against
demonetization, saying in a report that "demonetization may not be a solution for
tackling black money or economy, which is largely held in the form of benami
properties, bullion and jewellery." According to data from income tax probes,
black money holders kept only 6% or less of their wealth as cash, suggesting that
targeting this cash would not be a successful strategy.
 On 28 October 2016 the total banknotes in circulation in India was Rs 17.77
trillion (US$260 billion). In terms of value, the annual report of Reserve Bank of
India (RBI) of 31 March 2016 stated that total bank notes in circulation valued to
Rs 16.42 trillion (US$240 billion) of which nearly 86% (around Rs 14.18 trillion
(US$210 billion)) were Rs 500 and Rs 1,000 banknotes. In terms of volume, the
report stated that 24% (around 22.03 billion) of the total 90266 million banknotes
were in circulation.
 In the past, the Bharatiya Janata Party (BJP) had opposed demonetization. BJP
spokesperson MeenakshiLekhi had said in 2014 that "The aamaurats and the
aadmis (general population), those who are illiterate and have no access to
banking facilities, will be the ones to be hit by such diversionary measures."
 In June, the Government of India had devised the Income Declaration Scheme
that lasted till 30 September 2016, providing an opportunity to citizens holding
black money and undeclared assets to avoid litigation and come clean by
declaring their assets, paying the tax on them and a penalty of 45% thereafter.
 In 2016, the Indian government decided to demonetize the 500- and 1000- rupee
notes, the two biggest denomination notes. These notes accounted for 86% of the
country’s cash supply. The government’s goal was to eradicate counterfeit
currency, fight tax evasion, eliminate black money gotten from money laundering
and terrorist financing activities, and promote a cashless economy. By making the
larger denomination notes worthless, individuals and entities with huge sums of
black money gotten from parallel cash systems were forced to convert the money
at a bank which is by law required to acquire tax information from the entity. If
the entity could not provide proof of making any tax payments on the cash, a tax
penalty of 200% of the tax owed was imposed.
 In 2015, the Zimbabwean government demonetized the Zimbabwean dollar as a
way to combat the country’s hyperinflation that was recorded at 231,000,000%.
The 3-month process involved expunging the Zimbabwean dollar from the
country’s financial system and solidifying the US dollar, Botswana pula, and
South African rand as the country’s legal tender in a bid to stabilize the economy.
 Another example of demonetization occurred when the nations of the European
Monetary Union adopted the euro in 2002. In order to switch to the euro,
authorities first fixed exchange rates for the varied national currencies into Euros.

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When the euro was introduced, the old national currencies were demonetized.
However, the old currencies remained convertible into Euros for a while so that a
smooth transition through demonetization would be assured.
 The Coinage Act of 1873 demonetized silver in favor of adopting the gold
standard as the legal tender of the United States. The withdrawal of silver from
the economy resulted in a contraction of the money supply, which subsequently
led to a 5-year economic depression in the country. In response to the dire
situation and pressure from silver miners and farmers, the Bland-Allison Act
remonetized silver as legal tender in 1878.
1.2.4 OBJECTIVES
1) Removing black money from country: India has a huge parallel black
economy which the government can’t tax and which forms an island away from the main
economy. Nobody knows the exact figure but it has been estimated to be in the range tens
of thousands of Crores of Rupees in the past to lakhs of Crores today. You can be sure
that a good chunk of this will come into the main economy. It is a Herculean task to
merge the two streams of white and black money and a great beginning has already taken
place.
2) Stopping of corruption: by removing the currency notes from circulation, it will
have a direct impact on corruption. People who have these notes will now be left with
nothing.
3) Stopping terror funds: because of demonetization, the people or organizations
who used to fund terror groups will be now sitting without any works, they will naturally
die and that too with starvation.
4) Curbing fake notes: demonetization will also stop the circulation of fake notes in
the economy (although the amount of fake notes revolving in the economy was around
400 Crores).
5) Stopping illegaldabba trading: due to demonetization, the illegal share trading
and dabba trading will cease to exist. This will ensure stability in share markets,
especially at these 'times of turbulence'
6) The Uttar-Pradesh elections:it is generally seen that, there is ample liquidity in
the states, where elections are to happen, this thing is considered as vote bank and
politicians buy votes of people by offering them money, if they vote for them. Now
because of demonetization, vote bank system will not be in existence (the proof here is
currency notes, which were found from river Ganga). As an ultimate result, we would see
transparent elections.

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7) The betting on US presidential electionresults: it seems that Modiji is well
aware of the fact that Indians are a master in betting at anything like pro!!!! Because of
his address to nation at 8:00 pm, there will be no betting done on the us presidential
election results, or at least its quantum would be less than, what it should be have
earlier...
8) To send a clearmessagethat this government is wellinclined towards
working for the development of nation: because of his bold step, it will send a
clear message that this government is well inclined towards development of nation. It will
also send a message to the international community, that the government is doing
constant efforts to make India a better place to invest and a better place to do business.
1.2.5 POSITIVE AND NEGATIVE IMPACTS OF
DEMONETIZATION ON THE INDIAN ECONOMY
 At the stroke of the hour on midnight of 9th November 2016, India lost 86% of its
monetary base. The print, electronic and social media has been praising Prime
Minister’s masterstroke by which he has reportedly destroyed the base of
corruption in India.
 In this single move, the Government has attempted to tackle all the three issues
affecting the economy i.e. a parallel economy, counterfeit currency in circulation
and terror financing. There is no doubt that Prime Minister has pulled out a major
coop and substantially enhanced his reputation as a strong leader.
 The idea of demonetization is good but it has to be taken into consideration that
most of the black money is kept in the form of land, buildings or gold or kept
abroad. What is in cash constitutes only 4% of the total amount of black money
on which taxes are not being paid. Out of this, a lot of money is in circulation in
everyday transaction like if someone is building a house; the bill is not paid
through banks for sand, bricks etc.
 This money goes into the other systems though it has been drawn from bank.
These things will come under control with this step. Small farmers, sellers,
merchants, daily wage laborers and traders are suffering because of lack of proper
planning, intelligence and foresight such as recalibration of ATM machines.

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 There was need to pile up enough 100 Rupee notes and other smaller
denomination notes in the market before taking this step. It is being said by critics
that this step was taken only to bolster the image of the Prime Minister as he has
been unable to deliver on GDP growth, inflation and bringing the black money
from abroad.
 Demonetization is an established practice in monetary policy to tackle black
money. The Prime Minister has explained why this is a financial surgical strike. It
was meant to be suddenly implemented.
 In the past, demonetization has taken place twice but it fails because the idea is to
tackle the black money existing in circulation. This is not tackle corruption per se
or the Government is not saying that 100% corruption will be tackled. If
announcement and time would have been given, this step might not have been
successful in controlling black money and counterfeit currency in circulation
coming from Pakistan, Nepal or other countries.
 People are facing problems because the limit of withdrawal has not been kept at a
higher level. If this would have been kept at a higher level, there were chances
that the recycling of black money might begin. The ideal money in circulation has
to come to the banking channels.
 It is also being said that what is being attempted is replacement of currency and
not demonetization itself which was unnecessary. This is a terrible setback for the
international standing of the Indian economy. At this time, the economy is
struggling with slowdown. There is demand sluggishness in the economy leading
to practically no private sector investment and stagnant industrial growth.
If we look at the farm sector, this is the harvest time. Farmers generally deal in cash and
India is also largely a cash economy. The cash transactions in this economy are far more
than the total number of electronic transactions done on a daily basis. In the tribal
heartland of the country, the poor people through middlemen are getting their currencies
exchanged for Rs.300 or Rs.400 because of lack of proper information which is hitting
them. The stock of the black economy constitutes a major part of the GDP is significant.
Even if 50% of this amount is withdrawn, the kind of relief that RBI will get on its
liabilities and the sort of deposits commercial banks will get will lead to a rise in the
deposit and later on there will be decrease in lending rates plus fiscal deficit. The black
money in circulation is like a steroid in the economy which keeps the demand going
gives a feeling that everything is working well. The problem is that investment is not
taking place in the economy and the rate of growth of capital formation is down. The

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only way to bring this up is to divert more funds into investments which will happen
when the cost of capital comes down.
1.2.6 POSITIVE EFFECT
Human trafficking
Nobel laureate Kailash Satyarthi and others working to fight human trafficking said that
the note ban had led to a huge fall in sex trafficking. Satyarthi said the demonetization
would be effective in combating exploitation of children as well as corruption and would
be a great obstacle to traffickers. However, 2 months later he expressed his
disappointment on Rs 2000 notes being pushed into human trafficking in absence of other
concrete steps.
Radicalgroups
The Demonetization has badly hit Maoist and Naxalites as well. The surrender rate has
reached its highest since the demonetization is announced. It is said that the money these
organizations have collected over the years have left with no value and it has caused them
to reach to this decision.
The move also reportedly crippled Communist guerrilla groups (Naxalites) financing
through money laundering. On 10 November the police arrested a petrol pump owner at
Ranchi when he reportedly tried to deposit Rs 2.5 billion, belonging to a person affiliated
with the banned Communist Party of India (Maoist). According to Chhattisgarh Police
demonetization has affected the Naxalite activities. It is reported that insurgents have
stashed more than Rs 70 billion in the Bastar region.
While Manohar Parrikar claimed that the move has also helped in reducing the incidents
of stone-pelting in the Kashmir valley, his claim has been disputed.
Hawala
Mumbai Police reported a setback to Hawala operations. Hawala dealers in Kerala were
also affected. The Jammu and Kashmir Police reported the effect of demonetization on
Hawala transactions of separatists.
Railways

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As of November 2016, Indian Railways did not have the option to make payment with
cards at the counters. After the demonetization move, the government announced to make
card payment options available at railway counters in the country. The railways placed an
order for 10,000 card reader machines in January 2017.
1.2.7 NEGATIVE EFFECT
Cashshortage
The scarcity of cash due to demonetization led to chaos, and most people holding old
banknotes faced difficulties exchanging them due to endless lines outside banks and
ATMs across India, which became a daily routine for millions of people waiting to
deposit or exchange the Rs 500 and Rs 1000 banknotes since 9 November. ATMs were
running out of cash after a few hours of being functional, and around half the ATMs in
the country were non-functional. Sporadic violence was reported in New Delhi, but there
were no reports of any grievous injury, people attacked bank premises and ATMs, and a
ration shop was looted in Madhya Pradesh after the shop owner refused to accept Rs 500
banknotes.
The CMD of Punjab National Bank said that panic after demonetization started fading on
19 November 2016. As of 18 December 2016, there were still long queues at banks and
ATMs. Three months after the withdrawal of banknotes, a quarter of the ATMs were still
short of cash.
Deaths
Several people were reported to have died from standing in queues for hours to exchange
their old banknotes. Deaths were also attributed to lack of medical help due to refusal of
old banknotes by hospitals. As of 15 November 2016, the attributed death toll was 25.
And 33 deaths as of 18 November. In an interview, Chief Minister of Delhi Arvind
Kejriwal lashed out at a BBC reporter who asked him to justify his 19 November claim
that 55 deaths were linked to demonetization. By the end of the year, opposition leaders
claimed that over 100 people had died due to demonetization.
Stock marketcrash
As a combined effect of demonetization and US presidential election, the stock market
indices dropped to an around six-month low in the week following the announcement.
The day after the demonetization announcement, BSE SENSEX crashed nearly 1,689
points and NIFTY 50 plunged by over 541 points. By the end of the intraday trading
section on 15 November 2016, the BSE SENSEX index was lower by 565 points and the
NIFTY 50 index was below 8100 intraday.
Transportationhalts

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After the demonetization was announced, about 800,000 truck drivers were affected with
scarcity of cash, with around 400,000 trucks stranded at major highways across India
were reported. While major highway toll junctions on the Gujarat and Delhi-Mumbai
highways also saw long queues as toll plaza operators refused the old banknotes.
Nitin Gadkari, the Minister of Transport, subsequently announced a suspension of toll
collections on all national highways across India until midnight of 11 November, later
extended until 14 November and again until midnight of 18 November, and yet again till
2 December.
Agriculture
Transactions in the Indian agriculture sector are heavily dependent on cash and were
adversely affected by the demonetization of Rs 500 and Rs 1,000 banknotes. Due to
scarcity of the new banknotes, many farmers have insufficient cash to purchase seeds,
fertilizers and pesticides needed for the plantation of Rabi crops usually sown around
mid-November. Farmers and their unions conducted protest rallies in Gujarat, Amritsar
and Muzaffarnagar against the demonetization as well as against restrictions imposed by
the Reserve Bank of India on district cooperative central banks which were ordered not to
accept or exchange the demonetized banknotes.
Dumping of agricultural produce
The demonetization led to unavailability of cash to pay for food products. The reduction
in demand that arose in turn led to a crash in the prices of crops. Farmers were unable to
recover even the costs of transportation from their fields to the market from the low
prices offered. The prices dropped as low as 50 paise per kilo for tomatoes and onions.
This forced the farmers across the country to dump their products in desperation. Some
farmers resorted to burying unsold vegetables. Agricultural produce such as vegetables,
foodgrains, sugarcane, milk and eggs were dumped on roads. Some farmers dumped their
produce in protest against the government.
Banking
In the first four days after the announcement of the step, about Rs 3 trillion (US$45
billion) in the form of old Rs 500 and Rs ₹1,000 banknotes had been deposited in the
banking system and about Rs 500 billion (US$7.4 billion) had been dispensed via
withdrawals from bank accounts, ATMs as well as exchanges over the bank counters.
Within these four days, the banking system has handled About 180 million transactions.
The State Bank of India reported to have received more than Rs 300 billion (US$4.5
billion) in bank deposit in first two days after demonetization. A spike in the usage of
debit card and credit card post demonetization was also reported.
Between November 10 and November 27, banks reported exchange and deposits of
demonetized banknotes worth Rs 8.45 trillion (US$130 billion) (exchange of Rs 339.48
billion (US$5.0 billion) and deposits of Rs 8.11 trillion (US$120 billion)). During this

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period, an amount of Rs 2.16 lakh crore (US$32 billion) had been withdrawn by people
from their accounts.
In Malda, a district believed to be a transit-point for fake Indian currencies, a large sum
of cash deposits in dormant accounts was also reported. According to The Economic
Times, more than 80 percent of fake currency in India originates from Malda district in
West Bengal.
Business
By the second week after demonetization of Rs 500 and Rs 1,000 banknotes, cigarette
sales across India witnessed a fall of 30–40%,while E-commerce companies saw up to a
30% decline in cash on delivery (COD) orders. Several e-commerce companies hailed the
demonetization decision as an impetus to an increase in digital payments. They believe
that it would lead to a decline in COD returns which is expected to cut down their costs.
The demand for point of sales (POS) or card swipe machines has increased E-payment
options like PayTM and Instamojo Payment Gateway, PayUMoney has also seen a rise.
According to data of Pine Labs, the demand for its POS machines doubled after the
decision. Further it states that the debit card transactions rose by 108% and credit card
transactions by 60% on 9 November 2016.
ForecastofGDP growth rate
Global analysts cut their forecasts of India's GDP growth rate due to demonetization.
India's GDP in 2016 is estimated to be US$2.25 trillion; hence, each 1 per cent reduction
in growth rate represents a shortfall of US$22.5 billion (Rs. 1.54 lakh Crores) for the
Indian economy. According to SocieteGenerale, India's quarterly GDP growth rates
would drop below 7% for an entire year at a stretch for the first time since June 2011.
Drop in industrial output
There was a reduction in industrial output as industries were hit by the cash crisis. The
Purchasing Managers' Index (PMI) fell to 46.7 in November from 54.5 in October,
recording its sharpest reduction in three years. A reading above 50 indicates growth and a
reading below shows contraction. This indicates a slowdown in both, manufacturing and
services industries. The PMI report showed also showed that the reduction in inflation in
November was due to shortage in money supply.
The growth in eight core sectors such as cement, steel and refinery products, which
constitute 38% of the Index of Industrial Production (IIP), was only to 4.9 percent in
November as compared with 6.6 percent in October.
Income tax raids and cashseizures
The Finance Ministry instructed all revenue intelligence agencies to join the crackdown
on forex traders, Hawala operators and jewellers besides tracking movement of
demonetized currency notes it was reported that the Prime Minister's Office (PMO) and
the Prime Minister Modi himself were directly coordinating the raids conducted by the

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Income Tax, Enforcement Directorate (ED) and other agencies. As of 23 December,
PMO received around 700 calls giving information about black money and it directly
forwarded the information to various law enforcement agencies for further action.
Income Tax departments raided various illegal tax-evasive businesses in Delhi, Mumbai,
Chandigarh, Ludhiana and other cities that traded with demonetized currency. The
Enforcement Directorate issued several FEMA notices to forex and gold traders. Large
sum of cash in defunct notes were seized in different parts of the country. In Chhattisgarh
liquid cash worth of Rs 4.4 million (US$65,000) was seized.
As of December 28, official sources said that the Income Tax department detected over
Rs 4,172 crore of un-disclosed income and seized new notes worth Rs 105 crore as part
of its country-wide operations. The department carried out a total of 983 search, survey
and enquiry operations under the provisions of the Income Tax Act and has issued 5,027
notices to various entities on charges of tax evasion and Hawala-like dealings. The
department also seized cash and jewellery worth over Rs 549 crore out of which the new
currency seized (majority of them Rs 2000 notes) is valued at about Rs 105 crore. The
department also referred a total of 477 cases to other agencies like the CBI and the
Enforcement Directorate (ED) to probe other financial crimes like money laundering,
disproportionate assets and corruption.
Seizures of Rs.2000notes
Huge amounts of cash in the form of new notes were seized all over the country after the
demonetization. As of December 2016, over 4 crore in new banknotes of Rs 2000 were
seized from four persons in Bangalore, Rs 33 lakh in Rs 2000 notes were recovered from
Manish Sharma, an expelled BJP leader in West Bengal and Rs 1.5 crore was seized in
Goa.900 notes of the new Rs 2000 notes were seized from a BJP leader in Tamil Nadu.
Around Rs 10 crore in new notes were seized in Chennai.
As of 10 December, Rs 242 crore in new notes had been seized. It was noted in the media
that while people were dying in queues to obtain a few thousand rupees in cash, persons
with the right connections were able to amass Crores of rupees in new notes, thus
rendering the demonetization exercise futile.
It was announced by the government that the seized notes will be brought into the
mainstream as soon as possible to ease out the cash problem. Earlier, agencies kept all
seized material, including cash seizures, in their strong rooms as evidence till the case
was adjudicated by the courts. The seized money was then deposited into the
Consolidated Fund of India. Sometimes, income tax cases took years to resolve, still all
seized material was kept in safe lockers of the tax department.
Job losses
There was a loss of jobs due to demonetization, particularly in the unorganized and
informal sector and in small enterprises.

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1.2.8 EVASION ATTEMPTS
Gold purchases
In Gujarat, Delhi and many other major cities, sales of gold increased on 9 November,
with an increased 20 to 30% premium surging the price as much as Rs 45,000 (US$670)
from the ruling price of Rs 31,900 (US$470) per 10 grams (0.35 oz).
Income Tax officials raided multiple branches of Axis Bank and found bank officials
involved in money laundering acts, exchanging old notes for gold.
Donations in temples
In India, the cash deposited into hundis, or cash collection boxes in temples and
gurudwaras are exempted from inquiry by the tax department. This exemption is
sometimes misused to launder money. After the note ban, there was a spike in donations
in the form of the demonetized notes in temples. Authorities of Sri Jalakanteswarar
temple at Vellore discovered cash worth Rs 4.4 million (US$65,000) from the temple
hundi in the form of defunct notes.
Multiple bank transactions
There have been reports of people circumventing the restrictions imposed on exchange
transactions by conducting multiple transactions at different bank branches and also
sending hired people, employees and followers in groups to exchange large amounts of
banned currency at banks. In response, the government announced that it would start
marking customers with indelible ink. This was in addition to other measures proposed to
ensure that the exchange transactions are carried out only once by each person.
Railwaybookings
As soon as the demonetization was announced, it was observed by the Indian Railways
authorities that a large number of people started booking tickets particularly in classes 1A
and 2A for the longest distance possible, to get rid of unaccounted cash. A senior official
said, "On November 13, 42.7 million passengers were nationally booked across all
classes. Of these, only 1,209 were 1A and 16,999 for 2A. It is a sharp dip from the
number of passengers booked on November 9, when 27,237 passengers had booked
tickets in 1A and 69,950 in 2A."
The Railways Ministry and the Railway Board responded swiftly and decided that
cancellation and refund of tickets of value Rs 10,000 and above will not be allowed by
any means involving cash. The payment can only be through cheque/electronic payment.
Tickets above Rs 10,000 can be refunded by filing ticket deposit receipt only on
surrendering the original ticket. A copy of the PAN card must be submitted for any cash
transaction above Rs 50,000. The railway claimed that since the Railway Board on 10

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November imposed a number of restrictions to book and cancel tickets, the number of
people booking 1A and 2A tickets came down.
Municipal and localtax payments
As the use of the demonetized notes had been allowed by the government for the
payment of municipal and local body taxes, it led to people using the demonetized Rs 500
and Rs 1,000 notes to pay large amounts of outstanding and advance taxes. As a result,
revenue collections of the local civic bodies jumped. The Greater Hyderabad Municipal
Corporation reported collecting about Rs 1.6 billion (US$24 million) in cash payments of
outstanding and advance taxes, within 4 days.
The tax collection by local bodies have surged over 260% and more than 15000 crore
mare after 14 days of demonetization. The total indirect tax collection rose to 14.2% only
in the month of December according to Finance Minister Arun Jaitley.
Backdatedaccounting
The Enforcement Directorate raided several forex establishments making back dated
entries. Money laundering using backdated accounting was carried out by co-operative
banks, jewelers, sellers of iPhone and several other businesses.
1.2.9 REASONSFOR DEMONETIZATION
The reasoning given by the Indian Prime Minister Narendra Modi was:
1) To tackle black money in the economy.
2) To lower the cash circulation in the country which "is directly related to corruption in
our country," according to PM Modi.
3) To eliminate fake currency and dodgy funds which have been used by terror groups to
fund terrorism in India?
4) The move is estimated to scoop out more than Rs 5 lakh crore black money from the
economy, according to Baba Ramdev, a staunch Modi supporter.
5) Demonetization was initiated with a wide array of motives like stripping the Indian
economy of its black money, push people to pay taxes for the unaccounted pile of cash,
curb terrorism, promote the digital India movement and make India a cashless economy.
6) More and more cash-less or less-cash transactions will lead to routing of
consideration in bank thereby the more and more income will get disclosed and
declared which will increase the direct tax collections.

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7) A few businesses like land dealers, real estate dealers, promoters and builders,
goldsmith, jewelers, foreign currency dealers, private money lenders generally hold
huge amounts of unaccounted money in form of currency notes. Such money had
created a parallel economy in India. Such money has become void or has reached
bank accounts through direct or indirect channels.
8) Obviously there is bound to be some political reasons to reap advantage. These
could include the elections in UP, Uttaranchal, Punjab, Goa and the Mumbai
Municipality. This decision has dried out the treasury of the opposition parties so
they will not able to meet expenses related to assembly elections.
9) The fake currency notes circulating in the economy required a surgical attack.
Demonetization has converted those fake currency notes in pieces of papers.
10) In Modi’s initial speech and the gazette notification that followed, three
objectives were listed out: to end corruption and black money, to get rid of fake
notes and to stop terrorist financing.
1.2.10 ADVANTAGES OF DEMONETIZATION
1. A major advantage is that demonetization helped the government track black money.
Large sums of black money were kept hidden by tax evaders. Demonetization helped
government uncover huge amount of unaccounted cash. According to estimates made by
RBI, people have deposited more than rupees 3 lakh Crores worth of black money in the
bank accounts. This has helped the government in slowing down the plague of parallel
economy.
2. A major reason behind demonetization was that a big part of black money was being
used for funding terrorism, gambling, in inflating the price of major assets classes like
real estate, gold and other social evils. Demonetization is acting as an effective
countermeasure against such activities. Now all such activities will get reduced for some
time and also it will take years for people to generate that amount of black money again
and hence in a way it helps in putting an end this circle of people doing illegal activities
to earn black money and using that black money to do more illegal activities.
3. Another benefit is that due to people disclosing their income by depositing money in
their bank accounts government gets a good amount of tax revenue which can be used by
the government towards the betterment of society by providing good infrastructure,
hospitals, educational institutions, roads and many facilities for poor and needy sections
of society.

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The only means of exchange of old notes is through banks. That too there was a limit
ranging from Rs.2, 000/- Rs to Rs.4, 000/- per day depending on current liquidity
situation. Any amount higher needs to be deposited in the bank which can later be
withdrawn from ATMs again with the same limit. The main aim behind the limit was to
make sure that black money holders would not be able to exchange all the un- accounted
money without paying necessary tax (under PM Krishi Kalyan Yojana announced later).
Even if we consider 30% of cash in circulation as black money and even if half of it does
not come back to banks, government expected to get a fiscal push of approximately 2
lakh Crores which can be used for various welfare projects over a period of time
Since banks got enormous amounts of deposits, these can be best utilized to solve NPA
problem. Banks would want to lend out this money by offering at low interest rates
thereby improving economic activity and so GDP in the long run. Once the black money
held in cash is curtailed, the artificially created demand will go down, automatically
reducing the prices. So purchasing capacity of poor and lower middle class will increase
considerably. Many infrastructure projects which are stalled due to lack in investments
can be completed by getting funds from banks. Tax revenue increase will be tremendous
(already evident). May improve India's ranking in various indices like "Ease of doing
business index"
1.2.11 DISADVANTAGESOF DEMONETIZATION
1. The biggest disadvantage of demonetization has been the chaos and frenzy it created
among common people initially. Everyone was rushing to get rid of demonetized notes
while inadequate supply of new notes affected the day to day budgets of citizens. Banks
and ATMs witnessed long queues while small businesses suffered temporary financial
losses. The situation was even worse in rural India where people struggled to
Exchange and withdraw cash due to lack of enough number of banks and ATMs in their
vicinity.
2. Another disadvantage is that destruction of old currency units and printing of new
currency units involve costs which has to be borne by the government and if the costs are
higher than benefits then there is no use of demonetization.
3. Another problem is that this move was targeted towards black money but many people
who had not kept cash as their black money and rotated or used that money in other asset
classes like real estate, gold and so on were not affected by demonetization.
Recent IT raids and the Crores of un-accounted money found by them in new currency
shows lacuna in implementing the decision. Most of the bank workers tied up with high
net worth individuals in money exchange, making it difficult to achieve the purpose and

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creating cash crunch in the economy by not making the new currency available to
common man who is driving force of economy
Because of criticism from well known economists and neutral parties, people started
speculating currency crunch and started holding the money they have (no matter how
small) instead of spending, making the situation even worse
Fiscal push which government is expected to get may lead to fiscal indiscipline if not
spent properly
Government utilized this opportunity to push for digital transactions so that black money
can be curtailed to some extent and traders cannot escape paying indirect taxes once the
transaction is digital, which increases government income there by reducing fiscal deficit
We have a long way to go to become cash less economy especially from point of view of
security of digital transactions.
Even if a person is ready to make digital transaction, most of the vendors are not ready to
accept because of lack of awareness.
Rural poor might find it difficult to shift to digital economy (without help) because of
illiteracy.
In the short run demonetization will slow down the economy. Even a 1% drop in GDP
will out way the positive outcome government gets by removing unaccounted money
from economy. The cash crunch has majorly hit the rural poor especially when the
farmers were trying to sell their produce. Though black money is not good, in a way it
helps to expand economy. So slow down in the short run will be inevitable.
Postponement of GST bill is a bless in disguise since it gives the government time to
come up with best GST law. But postponement may disappoint investors which will
intern hurt already down trodden economy. Speculated increase in spending by low
interest rates because of improvement in cash deposits in banks is stalled by recent
monetary announcement from RBI which kept interest rates unchanged.
1.3 DEMONETIZATIONIMPACT ON VARIOUS SECTORS
 Economy Impact: Demonetization torpedoed India’s economy just when it was
getting into a cruise mode, fired by good monsoon-led rural demand and Seventh
Pay Commission-enabled urban buying. The 8% growth that looked within grasp
in FY17 is beyond horizon now. Only about a quarter of currency cancelled is
back in circulation, and that too is being stashed away for emergency. Lower
denomination notes are not available to facilitate transactions. The fall in demand

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will further dent already weak investments. The sharpest crash in services PMI
since November 2008 in the aftermath of the global financial crisis underscores
the risks. Ambit sees growth falling to a low of 3.5% in FY17. Others are not so
pessimistic, pencilling in about 7%.
 Jobs Impact: Hiring experts say jobs at senior levels are not and won’t be
impacted. But overall hiring is down right now, as managers seek to protect
revenue/profit targets. No job cut plans as of now. Variable pay/increment
amounts may be impacted. Job numbers are difficult to estimate, experts say, but
sectors where hiring is most hit are retail, consumer goods, real estate,
infrastructure, logistics (for ecommerce especially), auto consumables, and
building products. Hiring by mobile wallet and fintech companies are up, though.
 Consumer Spend Impact: Consumption, a big GDP contributor, will take a hit
for at least two quarters, say companies and analysts. Two main problems: Low
circulation of lower denomination notes, which may be temporary, and wealth
erosion, that is impacting big ticket purchases. FMCG sales dropped 20-30% in
November. At store levels, impulse buys like snacks, biscuits were hard hit, as
were personal care items, Nielsen data shows. December can be worse. Than
November, since last month consumer spend in the beginning of the month was
unaffected. Nine million retailers who buy from wholesalers are worst hit, and
will feel the pain for a while. Big, organized retail is doing well. Annual growth
rate is around 4.4%. Some big FMCG companies have cut production. Supply
chains are hit as cash fuels many transactions. Full impact will show up in a
month’s time, and can be severe.
 Real Estate Impact: Insiders say there’s a 40%-plus drop in enquiries and sales
across key markets of Mumbai, Delhi, Bengaluru and Pune. Deals in secondary
market have come to a standstill. In Bengaluru, drop in deal closings is as much
as 60%. Most homebuyers are waiting for big price reductions. With fear of black
money transactions and cash crunch added to an already slumping real estate
sector, near future is bleak.
 E-Commerce Impact: Mostly bad, some good. For the online retail market, gross
merchandise value (GMV) of players fell by 40-50% in first few weeks after
demonetization, in the middle of their biggest quarter for sales. Things may
remain bleak till March. Even high-value items like expensive smart phones are
selling less. Products returned are up by 50%. And experts feel consumer
sentiment won’t improve quickly. But the boost to digital payments (100% jumps
in transactions) has led industry to hope for a bright medium term. Also, grocery
and food delivery set-ups are doing better since they sell essential items. Some
saw new customer orders jump to 25%, from the usual 15-16%.
 Tourism Impact: Peak tourism period of November-December badly hit. For
tourist destinations beyond metros, business may be down by as much as 40%.
Tourism business in metros may go down by 10%. Cash shortage at airports and

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hotels are a big problem. And many national monuments entry points don’t have
card payments facilities. Western countries have issued advisories on cash crunch
in India.
 Autos Impact: Post-demonetization, there was some cushion at wholesale level
for Maruti Suzuki, Toyota Kirloskar Motor and Tata Motors from dealer demand
for new models or new variants like Baleno, Brezza, Fortuner, Innova and Tiago.
Hyundai India, Honda Cars India and Mahindra & Mahindra have seen some
short-term impact on sales. At the retail level, sales for cars without waiting
period are down 30-50%. Two-wheeler and commercial vehicles have been hit
harder. Sixty to 65% of entry level motorcycle sales happen in rural markets
where cash is king. Two-wheeler sales may have gone down by 5% last month.
Tata Motors posted a 17% decline in commercial vehicle sales in November.
 Aviation Impact: In world’s fastest growing aviation market, passenger traffic
growth will fall below 20% from an average 23-24% growth recorded in previous
years. Flight bookings dropped drastically in days after demonetization.
Recovered somewhat later. Offline travel agents, who took cash, badly hit. Flights
to small towns, where cash payments are the norm, are also badly hit, may post
negative growth.
 Telecom Impact: Mobile phone shipments fell by 26% in November, compared
to the previous month. Smartphone shipments are down by 23%. Inventory pile
up with retailers. Big sellers who do card and online transactions less badly hit.
IDC analysts expect sales for feature phones to drop by 25% in the quarter, and
smart phones to fall by 17.5%.
 Gold Impact: Scared by government warnings, sale of gold against old currency
notes fell drastically. NRI customers have fled. Sales are down sharply, and it was
already a bad year for gold.
 Agriculture Impact: Interestingly, villages have adapted in some ways better
than cities. GoI allowing tax free deposits of any amounts for farmers have led to
many of them getting 20% premium from traders when transacting. Informal
credit for daily purchases and use of old notes for key inputs and selling produce
have kept rural economy going. Crop planting increased 20-35% every week after
demonetization and remained higher than last year in all weeks after November 8.
But a lot depends on cash supply improving quickly in the New Year.
 Metals Impact: Real estate slowdown has hit steel, and may hit further.
Aluminum, copper, zinc also hit since they are raw materials in building industry
products. If auto sales are hit badly, metals business will do worse.

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1.4 IMPACT OF DEMONETIZATIONON COMMON MAN
Cashcrunch
The 500 and 1,000 rupee notes were the largest denomination of money, which made up
for 14 lakh Crores in circulation. Demonetization has a direct impact on sectors dealing
with cash—vendors, auto rickshaw wallahs, taxi drivers, daily wage earners and small
traders. The Indian system mainly functions on cash, and so, less cash means disruption
in the flow. Even sectors like real estate, which deal with illegal cash transactions, will go
through a rough patch leading to fall in profits.
Interest rates
When money is deposited in the bank, one earns interest for the same. After the
announcement of note ban, there have been huge cash deposits in banks. In fact, some of
the leading public and private banks have reduced the interest rates on deposits.
Depositors might get lesser interest on their deposits, but the good news is that it will
have a long-term positive effect on the economy as the lending rate (interest rate on loan)
will fall. This will boost credit and investment, to recover the slumping economy.
Inflation
Total cash available, and by this we mean the supply of money, has fallen, which may
lead to deflationary pressures (general price level becomes lower). In effect, it implies
less cash compared to the supply of goods. But as the price levels in India have been high
due to high inflation, fall in money supply can actually help in bringing down inflation.
With unaccounted money being wiped out, we can expect lesser pressure on demand. Fall
in inflation will help the common man, because goods will now become cheaper.
On the other hand, due to the slowing economy, if production falls more than the fall in
the supply of money, then the demand for goods will overshoot the supply of goods,
which in turn will lead to higher inflation. It all depends upon the effect on production
and economic activity in the nation.
The tax effect
Deposits above Rs 2.5 lakh that have not been justified or declared to the income tax
department will be penalized and taxed 200 per cent. This can help bring black money
into the white money fold, making it legal. This can also provide revenues for
government, which can be used to pay the deficit in the budget estimation. If economic
activity is slow, then the indirect taxes (tax on goods and services) will be lesser than
estimation. It all comes down to which is more, collection of penalties and taxes, or the
fall in indirect taxes. Demonetization could be the first step in creating a ripple in the
taxation policy before the Goods and Service tax (GST) rolls out.

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Growth
The gross domestic product, which is a parameter to measure growth in the economy,
will take a hit. Research firms have already cut growth estimates by 0.5 per cent. India’s
economy could shrink as there are many sectors run by cash. There are a lot of businesses
in the non-taxpaying sector, which will now be formalized; they will have to give up their
market share to the organized sector. This will cause shrinking of the economy and a fall
in the growth.
On the other hand, though there may be a fall in consumption due to shortage of cash,
growth won’t take a hit as high demand and consumption during the recent festival time
would offset the effect of fall in consumption and compensate for the fall.
This process would also forcibly bring in huge amount of money from the informal
sector, which was unaccounted for. This will help in the growth and therefore GDP
would not face a negative impact.
 The move of demonetization though was opposed by many from the political
field; the common man is indeed gleeful. The stashes of cash that was stored in
suitcases, store rooms or mattresses went worthless in no time and this was indeed
a deserving punishment given by the government to all those who stacked Crores
worth of black money.
 The cash economy has done harm to many of us as we end up storing money.
There are two kinds of cash economies, the grey economy and the black one. The
grey economy is all about legitimate business but as most of the transactions
happen through cash, it can conceal income. The black economy refers to the
illegal businesses which include bribes, protection money and ransom.
 The common intent in both these systems is to hide one’s earnings and to avoid
tax. As the grey economy uses cash to buy goods, the prices are inflated.
With demonetization, our country is heading towards digital economy which in
turn is good news for the regular tax payer and also the common man.
Impact of Demonetizationon the Income Tax Payer
 Most of the income tax in our country is paid by the salaried class who mostly are
left with no choice but to pay the tax. Most of the people who pay tax are those
who earn the amount of Rs. 5 lakhs and above and the government with the
demonetization move is trying to bring more people under the taxation net as this
would reduce the income tax rate.
 Many financial experts feel that the move of demonetization is indeed a
welcoming move and with a little thought, you as a tax payer would know what’s
coming your way in the near future.

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 What one can expectdue to demonetization?
Drop in Income Tax Rates: It can be said that one of the hidden motives of
demonetization is to reduce the income tax rates. It would ensure better tax
compliance as more people will start to pay taxes. As the number of people
paying taxes would increase, this would lower the income tax rates. The same was
stated by our Finance Minister who quoted that the government is ready to lower
the income tax rates if more people start paying taxes.
If the expected results of demonetization are achieved, the tax payers can also
expect a single digit rate for income tax in the next couple of years. This is
possible if the government scraps all the taxes and just implements the transaction
tax which will make everyone in country a tax payer.
Zero Tax Harassment: The income tax rate and tax compliance are indirectly
proportional and also tax compliance and the tax harassment are indirectly
proportional. As one can expect high tax compliance, it virtually means zero
compliance. For example, if the income tax is more, there are chances that the
taxpayer can evade tax. If there is low tax compliance, it gives the IT department
more cases of tax evasion and in many cases, even a simple notice sent for the
clarification is considered by many as tax harassment.
Simple Rules and Regulations: Many of the tax payers feel that the tax rules and
regulations are quite hard to understand. The IT rules can get simplified as the tax
compliance increases. It can hence be said that demonetization is indeed the first
step towards making IT rules simple. Tax implications due to demonetization will
do more good to tax-payers than harm.
The tax payer will have a simplified structure if the transaction tax becomes a
reality. For it to become a reality, it is important for our country to have a cashless
economy. The reason for this is that the government cannot implement transaction
tax on cash payments; the payments have to be digital.
1.5 IMPACT OF DEMONETIZATIONON MIDDLE AND LOWER
INCOME GROUP
The study reveals that there was a huge impact of demonetization on middle and lower
income groups. The people had to forego their personal opportunities pertaining to career
or personal life due to the currency shortage during demonetization and not only that but
people had to stand in a queues for hours to withdraw their own money that too not as
much as they want. The promise was made to the people of the nation that they will get
15 lakh in each ones account after the move and which has not fulfilled.

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However, the move was very necessary in order to put a control over many illegal
activities that were happening in the country and the move will ultimately bring benefit in
a long run for the nation. Demonetization leads to cash shortages in the country which
proves detrimental to a number of small business, agriculture and transportation. The
shortage of cash led to chaos and most people faced problems to exchange their
banknotes due to long queues outside banks and ATMs across the country. The
demonetization of the highest denomination currency notes is part of several measures
undertaken by the government to address tax evasion, counterfeit currency and funding of
illegal activities. The requirement to deposit currency notes in excess of specified limits
directly into bank accounts has resulted in the declaration of hitherto unaccounted
income, subject to higher tax and other penalties. India has one of the highest levels of
currencies in circulation at over 12% of GDP and of this hot cash of 87% is in the form of
Rs.500 and Rs.1, 000 notes. Globally, this is not unusual as the central banks of several
countries pump massive amounts of cash into the economy, mostly in very large
denominations. Facilitating faster payment services. The payments eco-system in the
country provides multiple options to different segments of users for funds transfer as well
as for making payments in exchange of value for goods and services. With increasing
adoption of electronic payments, particularly those driving e-commerce and m-
commerce, there is a growing demand for faster payment services which, in turn,
facilitate ease in doing financial transactions
CHAPTER-2
REVIEW OF LITERATURE AND RESEARCHDESIGN
2.1 INTRODUCTIONTO RESEARCHDESIGN
A research design is the set of methods and procedures used in collecting and analyzing
measures of the variables specified in the research problem research study. The design of
a study defines the study type (descriptive, co relational, semi-experimental and
experimental, review, meta-analytic) and sub-type (e.g., descriptive-longitudinal case
study) research problem, hypotheses, independent and dependent variables, experimental
design, and, if applicable, data collection methods and a statistical analysis plan.
Research design is the framework that has been created to find answers to research
questions.
2.2 TITLE OF THE STUDY
A STUDY ON “IMPACT OF DEMONITIZATION ON MIDDLEAND LOWER
INCOME GROUP”

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2.3 STATEMENTOF THE PROBLEM
Demonetization is a process where government declares the currently running currency
note as illegal to be tender and it has a great significance and immediate impact on the
Indian economy. The main reason for demonetization is to control or eliminate the “black
economy”. Therefore in this research an attempt has been made to find the impact of
demonetization on middle and lower income group people.
Therefore the study addresses the following issues:-
 Elimination of black money from the country.
 Promotion of cash less economy.
 Decision to issue higher currency notes of Rs 2000.
2.4 REVIEW OF LITTERATURE
Urjit Patel, RBI governor 2016. It is important to regularly review the situation, and
taking the required decisions to ease the genuine pain of citizens who are honest and who
have been hurt. There are no precedents on this subject at this scale and we have to be
reactive to the situation.
Subbarao Former RBI governor 2016. Indian government could use the currency that
is not returned to solve its fiscal problems or to recapitalise banks. He warned that any
such step would send a wrong message. “Then demonetization will be viewed as being
done with other motives, rather than fighting black money”.
Manmohan Singh, Former Prime Minister, 2016. Would not like to say that he urges
upon the Prime Minister to find practical, pragmatic ways and means to relieve the
distress of the people who happen to be a great majority. After all, 90 per cent of our
people work in the informal sector, 55 per cent of our workers in agriculture are reeling
in distress. The cooperative banking system which serves large number of people in the
rural areas is nonfunctional and has been prevented from handling cash. So, in all these
measures convince me that the way this scheme has been implemented is a monumental
management failure, and in fact, it is a case of organized loot, legalized plunder of the
common people.
Dr. Kavita Rao, NIPFP, New Delhi. 14-Nov-2016.The argument posited in favour of
demonetisation is that the cash that would be extinguished would be “black money” and
hence, should be rightfully extinguished to set right the perverse incentive structure in the
economy. While the facts are not available to anybody, it would be foolhardy to argue
that this is the only possibility. Therefore, it is imperative to evaluate the short run and
medium term impacts that such a shock is expected to have on the economy. Further, the
impact of such a move would vary depending on the extent to which the government
decides to remonetise.
2.5 OBJECTIVESOF THE STUDY

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To understand the concept of demonetization.

To study the impact of demonetization on middle and low income group.
To analyze the reason for demonetization in the country.
To study the awareness level of demonetization among the lower income group.
To study the income generation capacity and their spending after demonetization.
Analyze the success of government in promoting cashless economy.
2.6 SCOPE OF THE STUDY
Impact of demonetization on the People belongs to middle and lower income group, the
study is limited to the area of Bangalore.
2.7 HYPOTHESIS
1. H0: There does not exist a relationship between demonetization and black
money.
H1: There exist a relationship between demonetization and black money.
2. H0: There does not exist a relationship between demonetization and cash less
economy.
H1: There exist a relationship between demonetization and cash less economy.
3. H0: There is no impact of demonetization on middle income group.
H1: There is an impact of demonetization on middle income group.
2.8 RESEARCHMETHODOLOGY

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The research is descriptive and analytical in nature; descriptive research includes survey,
fact/findings, and enquiries of different kinds.
2.8.1 SAMPLING DESIGN
Population will be different people belongs to middle and lower income group.
2.8.2 SAMPLING PLAN
It is the process of selecting the units from a population of interest so that by studying the
Sample we may fairly generalized our result back to the population from which they were
chosen. Hence the sample has been selected from the general public belonging to low and
middle income group.
2.8.3 SAMPLE SIZE
Sample of 50 respondents will be covered based on questionnaire
2.8.4 SAMPLING TECHNIQUE
The selection of employees will be based on a random basis applying simple random
sampling technique.
2.8.5 TOOLS FOR DATA COLLECTION
Primary Data
 The data consisted of Information collected with the help of questionnaire with
different income group people.
 Observation method was used for understanding the awareness level of impacts of
demonetization.
Secondary Data
Data was collected from already published and available data on internet, research
articles, related journals, different books on monetary system etc
2.9 OPERATIONALDEFINITION
 Demonetization
Demonetization is the act of stripping a currency unit of its status as legal tender.

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 Cashless transactions
Functioning, operated, or performed without using coins or bank notes for money
transactions but instead using credit cards or electronic transfer of funds.
 Tax evasion
Ways of illegally paying less tax than you should.
 Black money
Money that is earned illegally, or on which the necessary tax is not paid
 Counterfeit Currency
Currency made to look like the original of, usually for dishonest or illegal
purposes.
 Corruption
Illegal, bad, or dishonest behavior, especially by people in positions of power
2.10 PLAN OF ANALYSIS
The information obtained from other sources were processed, tabulated, interpretation
and analyzed in the form Tables, Charts. It is likely analysis of data will be more
analytical and descriptive in nature of the study.
2.11 LIMITATIONS OF THE STUDY
1. Time constraint
2. Financial constraints
3. The findings are based on the information provided by the respondents.
4. Respondents were biased.
5. The sample size is restricted to 50 responded only.

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CHAPTER - 3
RESPONDENTSPROFILE
3.1 INTRODUCTIONTO DEMONETIZATION
In 2016, the Indian government decided to demonetize the 500- and 1000- rupee notes,
the two biggest denominations in its currency system; these notes accounted for 86% of
the country’s circulating cash. With little warning, India's Prime Minister Narendra Modi
announced to the citizenry on Nov. 8 that those notes were worthless, effective
immediately – and they had until the end of the year to deposit or exchange them for
newly introduced 2000 rupee and 500 rupee bills.
Chaos ensued in the cash-dependent economy (some 78% of all Indian customer
transactions are in cash), as long, snaking lines formed outside ATMs and banks, which
had to shut down for a day. The new rupee notes have different specifications, including
size and thickness, requiring re-calibration of ATMs: only 60% of the country’s 200,000
ATMs were operational. Even those dispensing bills of lower denominations faced

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shortages. The government’s restriction on daily withdrawal amounts added to the
misery, though a waiver on transaction fees did help a bit.
Small businesses and households struggled to find cash and reports of daily wage
workers not receiving their dues surfaced. The rupee fell sharply against the dollar
The government’s goal (and rationale for the abrupt announcement) was to combat
India's thriving underground economy on several fronts: eradicate counterfeit currency,
fight tax evasion (only 1% of the population pays taxes), eliminate black money gotten
from money laundering and terrorist-financing activities, and to promote a cashless
economy. Individuals and entities with huge sums of black money gotten from parallel
cash systems were forced to take their large-denomination notes to a bank, which was by
law required to acquire tax information on them. If the owner could not provide proof of
making any tax payments on the cash, a penalty of 200% of the owed amount was
imposed.
Demonetization is the act of stripping a currency unit of its status as legal tender. It
occurs whenever there is a change of national currency: The current form or forms of
money is pulled from circulation and retired, often to be replaced with new notes or
coins. Sometimes, a country completely replaces the old currency with new currency.
Demonetisation is an act of cancelling the legal tender status of a currency unit in
circulation. Anticipating positive changes on the liquidity structure as whole, nations
often adopt Demonetisation policy as a measure to counterbalance the current economic
condition. Countries across the globe have used Demonetisation at some or the other
point to control situations such as inflation and to boost economy. In November, Indian
government banned the high denomination notes of Rs.1000 and Rs.500 as move to curb
counterfeiting and money laundering.
3.2 PROFILE OF INDIAN CURRENCY

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The word "rūpiye" is derived from a Sanskrit word "rūpaa", which means "wrought
silver, a coin of silver", in origin an adjective meaning "shapely", with a more specific
meaning of "stamped, impressed", whence "coin". It is derived from the noun rūpa
"shape, likeness, image". The word rūpa is being further identified as having sprung from
the Dravidian.
The Indian rupee was a silver-based currency during much of the 19th century, which had
severe consequences on the standard value of the currency, as stronger economies were
on the gold standard. During British rule, and the first decade of independence, the rupee
was subdivided into 16 annas. Each anna was subdivided into either 4 paisas or 12 pies.
So one rupee was equal to 16 annas, 64 paises of 192 pies. In 1957, decimalization
occurred and the rupee was divided into 100 naye paise (Hindi/Urdu for new paisas).
After a few years, the initial "naye" was dropped.
For many years in the early and mid-20th century, the Indian rupee was the official
currency in several areas that were controlled by the British and governed from India;
areas such as East Africa, Southern Arabia and the Persian Gulf.
The currency used by the India is known as the Indian Rupee, which is also written out in
full as the India Rupee and popular exchange rate is USD to INR. The currency symbol
for the Indian Rupee is figured above, while the currency code is INR.
Udaya Kumar Dharmalingam born 10 October 1978 in Kallakurichi, Tamil Nadu is the
designer of the Indian rupee sign. His design was selected from among five short listed
symbols According to Udaya Kumar the design is based on the Indian tricolor. He is an
assistant professor at IIT Guwahati.

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3.3 PROFILE OF THE RESPONDENTS
3.3.1 Table showing the Gender wise classificationofthe respondents
ANALYSIS
From the above table it can be analyzed that 46% of the respondents are male and rest 54%
are females.
3.3.1 Graph showing the Gender wise classificationof the respondent.
PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTAGE
Gender Classification
Male 23 46
Female 27 54
TOTAL 50 100

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INTERPRETATION
From the above graph it can be interpreted that majority of respondents are female. Hence
this classification is to know who are more affected from the demonetization among middle
and lower income group people.
3.3.2 Table showing the Age classificationofthe respondents

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ANALYSIS
From the above table it can be analyzed that 66% of the respondents belong to the age less
than 25 years, 24% of the respondents belong to the age between 25-45 years, and 10% of
the respondents belong to the above 45 years.
3.3.2 Graph showing the Age classificationof the respondents
PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTAGE
Age classification
Less than 25 years 33 66
Between 25 -45 12 24
Above 45 years 5 10
TOTAL 50 100

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INTERPRETATION
From the above graph it can be interpreted that the people above the age of 25 are
affected the most by the demonetization as they are earners and are regularly deals with
money.
3.3.3 Table showing the qualification wise classificationofthe
respondents.

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PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTAGE
Qualification wise
classification
Graduate 17 34
Under graduate 3 6
Post graduate 25 50
Any other 5 10
TOTAL 50 100
ANALYSIS
From the above table it can be analyzed that 17% of respondents are graduate, 6% of
respondents are under graduate, and 50% of respondents are post graduate and rest 10%
of respondents are qualified with other courses
3.3.3 Graph showing the qualification wise classificationofthe
respondents.

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INTERPRETATION
From the above graph it can be interpreted that respondents are from different
educational background and majority of them are post graduates.
3.3.4 Table showing the classificationof respondents basedon marital
status.

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PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTAGE
Classification based on
marital status
Married 18 36
Unmarried 32 64
TOTAL 50 100
Analysis
From the above table it is analyzed that 36% of respondents are married and rest 64% of
respondents are unmarried.
3.3.4 Graph showing the classificationofrespondents basedon marital
status.

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Interpretation
From the above graph it can be interpreted that the majority of respondents are unmarried
and are affected. Since they have started taking responsibilities and working for their and
family livelihood. Demonetization has affected both of them in their respective manner.
3.3.5 Table showing the classificationof respondents basedon Work
experience.

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PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTAGE
Classification based on work
experience
0-5 years 32 64
5-10 years 15 30
Above 10 years 3 6
TOTAL 50 100
Analysis
From the above table it can be analyzed that 64% of respondents are with 0-5 experience,
30% of respondents are with 5-10 years of experience and rest 6% of respondents are
with work experience above 10 years.
3.3.5 Graph showing the classificationofrespondents basedon work
experience.

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Interpretation
From the above graph it can be interpreted that the data is collected from the people with
the different work experiences and it can be found that 0-5 years of work experience are
more affected.
3.3.6 Table showing the classificationof respondents basedon income
per year.

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Analysis
From the Above table it is identified that 44% of respondents are with the income
between less than 1 lakh per year, 34% of respondents are with income 1 lakh – 3 lakh
per year and rest 22% of respondents are with the income level of above 3 lakh per year.
3.3.6 Graph showing the classificationofrespondents basedon income
per year.
PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTAGE
Classification based on
income per year
Less than 1 lakh 22 44
1 lakh - 3 lakh 17 34
Above 3 lakh 11 22
TOTAL 50 100

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Interpretation
From the above table it is analyzed that data is collected from the different people with
different income generation group and it can found that people with income less than
1 lakh per year are more.
CHAPTER - 4
DATA ANALYSIS AND INTERPRETATION

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4.1 Table showing that what were the main problems faced by you
when demonetization was announced?
ANALYSIS
From the above table it can be identified as 50% of respondents were facing problem of
getting new currency, 40% were facing problem of getting change from store and only
10% respondents are facing problem of purchasing product that cost less than 100rs.
4.1 Graph showing that what were the main problems faced by you
when demonetization was announced?
PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTTAGE
What were the main
problems faced by you when
demonetization was
announced?
Getting New Currency 25 50
Getting change from
the store
20 40
The ability to purchase
product that cost less
than 100 rupees
5 10
TOTAL 50 100

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Interpretation
From the above table it can be interpreted that maximum people are facing problem of
getting new currency at the time of demonetization. Since demonetization is a withdrawal
of present currency as legal tender and every individual holds currency, hence maximum
number of people are aware of demonetization because all people have faced some or the
other problem.
PARTICULARS SCALE
RESPONDENT (n=50)

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4.2 Table showing the impact level of demonetization middle and lower
income group?
ANALYSIS
From the above table it can be analyzed that the demonetization has impacted completely
on middle and lower income group by 62% of respondents, partially for 28% of
respondents and 10% had responded not at all.
4.2 Graph showing the impact level of demonetization middle and lower
income group?
RESPONSES PERCENTTAGE
The impact level of
demonetization middle and
lower income group?
Completely 31 62
Partially 14 28
Not at all 5 10
TOTAL 50 100

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Interpretation
From the above graph it can be interpreted that demonetization has affected the
maximum number of individuals in a country because there were lack of supply of new
currency after the existing one was made no longer a legal tender and people were facing
difficulties for their day to day petty cash transactions and specially this is being faced by
middle and lower income class people.
4.3 Table showing was people were able to withdraw cashwhenever
they went to the ATM at the time of demonetization.

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Analysis
From the above table it can be analyzed that at the 24% respondent were facing a huge
problem at the ATM, 20% were not at all facing any problem and many of respondents
responded on 56% as they were facing the problems probably i.e sometimes.
4.3 Graph showing was people were able to withdraw cash whenever
they went to the ATM at the time of demonetization.
PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTTAGE
Was people were able to
withdraw cash whenever they
went to the ATM at the time
of demonetization.
Yes 12 24
No 10 20
Sometimes 28 56
TOTAL 50 100

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Interpretation
From the above graph it can be interpreted that due to demonetization and lack of money
supply some people were facing a huge problems and some were not. But according to
the graph many of the respondents responded on sometimes they face problems in the
Atm and sometimes they not.

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4.4 Table showing how do people feel about moving into digitalization?
Analysis
From the above table it can be analyzed that how respondent feel moving into
digitalization 66% of the respondents says it was useful at times but not always where
14% says it’s inconvenient and 20% preferred liquid cash more than that of getting into
digitalization.
PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTTAGE
How do people feel about
moving into digitalization?
it was easier than
having a liquid cash
10 20
it was very
inconvenient
7 14
it was useful at times but
not always
33 66
TOTAL 50 100

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4.4 Graph showing how do people feel about moving into
digitalization?
Interpretation
From the above graph it can be interpreted that people are happy in moving into
digitalization but at the same time they are inconvenient in using digitalization process as
for this the learning for the same is equally mattes.

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4.5 Table showing after demonetization does black money still exists?
ANALYSIS
From the above table it can be identified that 70% of respondents agree that
black money still exist in India whereas only 2% of respondents say black
money do not exist in India and 28% are confused they say maybe it’s there.
PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTAGE
Existence of black money
in India
Yes 35 70
No 1 2
Maybe 14 28
TOTAL 50 100

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4.5 Graph showing after demonetization does black money still exists?
Interpretation
From the above graph it can be interpreted that the majority of respondents favored
existence of black money in India, hence the demonetization aims towards fighting
against black money and it was successful in removing black money to some extent but
not completely.

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4.6 Table showing on whom the impact of demonetization affected
badly?
ANALYSIS
From above table it is identified that the 96% of respondents says the middle and the
lower class people affected the most by the demonetization, 6% of respondents says the
high class and remaining 2% says it’s none of them.
PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTTAGE
On whom the impact of
demonetization affected
badly?
The high class 3 6
The middle and lower
class
46 92
None of them 1 2
TOTAL 50 100

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4.6 Graph showing on whom the impact of demonetization affected
badly?
Interpretation
From the above graph it can be interpreted that the middle and lower class people are
affected most by the demonetization. The rich people exchanged their money with the
help of their influence with bank managers and other authoritative persons and the lower
class people didn’t have much money in their hands to exchange. It is a middle and lower
class who suffered a lot with the demonetization decisions in order to exchange/withdraw
money.

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4.7 Table showing the primary motive of demonetization.
ANALYSIS
From the above table it can be analyzed that 4% of respondents believes that the primary
motive of demonetization was finance, 48% believes that it was a strike against
corruption, 44% believes it was a political move and remaining 4% believes there was
other motive behind demonetization.
PARTICULARS
Primary motive of
demonetization.
SCALE
RESPONCENT (n=50)
RESPONSES PERCENTTAGE
Financial, It was a strike
against corruption 29 58
Political 20 40
Other 1 2
TOTAL 50 100

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4.7 Graph showing the primary motive of demonetization.
Interpretation
From the above graph it can be interpreted that the majority of respondents says
demonetization was a strike against corruption. Corruption is one of the biggest problems
in the growth of the country and demonetization is proved to be the best decision by the
government in order to eliminate corruption from the country.

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4.8 Table showing the ban of Rs 500 and Rs 1000 note will bring an end
to.
PARTICULARS SCALE
RESPONCENT (n=50)
RESPONSES PERCENTTAGE
Ban of Rs 500 and Rs
1000 note will bring an
end to
Black Money 21 42
Corruption 3 6
Terrorism 1 2
Counterfeiting of
Currency
5 10
None of the above 20 40
TOTAL 50 100
ANALYSIS
From the above table it can be analyzed that the 40% of respondents say demonetization
will not bring an end to black money, corruption, terrorism and counterfeiting of
currency.42% of respondents says it will bring an end to black money, 6% says it will
end corruption, 2% says it will end terrorism and 10% says it will end counterfeiting of
currency.

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4.8 Graph showing the ban of Rs 500 and Rs 1000 note will bring an end
to.
Interpretation
From the above graph it can be interpreted that the maximum number of respondent
expected that demonetization have put an end to black money at same time after that
many of the respondents expecting demonetization will put an end to black money,
corruption and terrorism and counterfeiting of currency. But demonetization didn’t
control all the illegal activities of financial matters completely but it was successful to
some extent.

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4.9 Table showing that middle and lower income group Loss their
employment due to demonetization?
ANALYSIS
From the above table it can be analyzed that 14% of the respondent are not sure whether
demonetization leads to the loss of employment, 78% says it leads to loss of employment
and remaining 8% says no to it.
PARTICULARS SCALE
RESPONDENT
RESPONSES PERCENTTAGE
Loss of employment due
to demonetization
Yes 17 78
No 13 8
Not sure 20 14
TOTAL 50 100

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4.9 Graph showing that middle and lower income group Loss their
employment due to demonetization?
Interpretation
From the above graph it can be interpreted that most of the respondents say that
demonetization leads to the loss of employment. Since everyone lose their jobs but some
of the wage earners had faced a huge problem because of lack of cash supply available in
the country to provide for the wage.

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4.10 Table showing did government succeeded in promoting cash less
economy
Analysis
According to the above table 62% of majority respondents say that government have
succeed in promoting cashless economy to some extent, 22% think not at all, only 1%
think it’s completely successful and 14% are not sure in cashless economy.
PARTICULARS SCALE
RESPONDENT
RESPONSES PERCENTTAGE
Did government succeeded in
promoting cash less economy
Yes to some extent 31 62
Not at all 11 22
Completely
successful
1 2
Not sure 7 14
TOTAL 50 100

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4.10 Graph showing did government succeeded in promoting cash less
economy
Interpretation
From the above graph it can be interpreted that maximum people agrees that government
was successful in promoting cashless economy with the demonetization move. Since the
government was promoting the cashless economy even before the demonetization, but
after the move when there was lack of cash available, the people moved towards the
cashless transactions and the government has also launched the new BHIM app to
promote cashless transaction, but still 100% of the population is not using this facilities
because of lack of knowledge to use. Government should educate about the importance
and convenience of the cashless economy.

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4.11 Table showing Improvement in quality of life of common man
(middle and lower income group) after demonetization
ANALYSIS
From the above graph it can be analyzed that 42% of respondents can’t say whether
demonetizations will improve in quality of life of common man. 6% respondents
completely agree that it will improve the quality of life, 22% partially agree and rest 30%
respondents disagree to it.
PARTICULARS SCALE
RESPONCENT (n=50)
RESPONSES PERCENTTAGE
Improvement in quality of life
of common man (middle and
lower income group) after
demonetization
Completely agree 3 6
Partially agree 11 22
Can’t say 21 42
Disagree 15 30
TOTAL 50 100

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4.11 Graph showing Improvement in quality of life of common man
(middle and lower income group) after demonetization
Interpretation
From the above graph it can be interpreted that the maximum number of respondents are
not sure whether the demonetization will improve the quality of life of a common man.
Since people were not aware how far the move is going to be successful and help the
common man to improve the quality of their life.

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4.12 Table showing difficulty in using new Rs 2000 notes in the market.
ANALYSIS
From the above table it can be analyzed that 90% of respondents says that they faced
difficulty in using new Rs 2000 notes in the market and remaining 10% of respondents says
no to it.
PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTAGE
Difficulty in using new
Rs 2000 notes in the
market
Yes 45 90
No 5 10
TOTAL 50 100

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4.12 Graph showing difficulty in using new Rs 2000 notes in the market.
Interpretation
From the above graph it can be interpreted that most of the respondent faced difficulties
during demonetization to use the higher currency notes of 2000 notes in the market. Rs
1000 and Rs 500 notes were banned so there was no sufficient currency in the market to
provide the change for Rs 2000 after some small purchases. Hence most of the
respondents faced difficulties to use Rs 2000 notes in the market.

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4.13 Table showing the impact of demonetization on curbing black
money, corruption and terrorism.
ANALYSIS
From the above table it can be analyzed that 4% of respondents says demonetization has
helped in curbing black money, corruption and terrorism and 34% says no to it whereas
the rest 62 % of respondents says yes but believes that it needed better planning.
PARTICULARS SCALE
RESPONDENT (n=50)
RESPONSES PERCENTTAGE
Impact of
demonetization on
curbing black money,
corruption and
terrorism.
Yes 3 4
Yes, but need better
planning
31 62
No 17 34
TOTAL 50 100

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4.13 Graph showing the impact of demonetization on curbing black
money, corruption and terrorism.
Interpretation
From the above graph it can be interpreted that maximum respondents believes that
demonetization will help in removing black money, corruption and terrorism from the
country but it needed much better planning for the complete success of demonetization
without causing the much of inconvenience to individuals.

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4.14 Table showing whether demonetization should have been
implemented in a phasedmanner.
PARTICULARS SCALE
RESPONCENT (n=50)
RESPONSES PERCENTTAGE
Whether demonetization should
have been implemented in a
phased manner
Strongly agree 12 24
Strongly disagree 1 2
Agree 35 70
Disagree 2 4
TOTAL 50 100
ANALYSIS
From the above table it can be identified that 24% of respondents strongly agrees that
demonetization have been implemented in a phase manner, 2% respondents strongly
disagrees, 70% respondents agree and remaining 4% respondents disagrees to the
statement.

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4.14 Graph showing whether demonetization should have been
implemented in a phasedmanner.
Interpretation
From the above graph it can be analyzed that the demonetization had to be implemented
in a phased manner but implementing demonetization in a phased manner would have not
served its purpose and hence it has to be surprised move.

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CHAPTER – 5
FINDINGS, SUGGETIONS, CONCLUSION AND
WEBLIOGRAPHY
5.1 FINDINGS
 It is found that 46% of the respondents are male and rest 54% is females
.
 It is found that 66% of the respondents belong to the age less than 25 years, 24%
of the respondents belong to the age between 25-45 years, and 10% of the
respondents belong to the above 45 years.
 It is found that 34% of respondents are graduate, 6% of respondents are under
graduate, 50% of respondents are post graduate and rest 10% of respondents are
qualified with other courses.
 It is found that 36% of respondents are married and rest 64% of respondents is
unmarried.
 It is found that 64% of respondents are with 0-5 experience, 30% of respondents
are with 5-10 years of experience, 6% of respondents are with work experience
above 10 years.
 It is found that 44% of respondents are with the income less than 1 lakh per year,
34% of respondents are with income 1 lakh – 3 lakh per year and 22% of
respondents are with the income level of above 3 lakh per year.
 It is found that 50% of the respondents were facing problem of getting new
currency and 40% of respondent was facing problem of getting change from the
store and rest 10% were facing the problem of purchasing goods that cost less
than 100 rupees.
 It is found that the demonetization has impacted completely on middle and lower
income group by 62% of respondents, partially for 28% of respondents and 10%
had responded not at all.
 It is found that the 24% respondent were facing a huge problem at the ATM, 20%
were not at all facing any problem and many of respondents responded on 56%
as they were facing the problems probably i.e sometimes.
 It is found that how respondent feel moving into digitalization 66% of the
respondents says it was useful at times but not always where 14% says it’s

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inconvenient and 20% preferred liquid cash more than that of getting into
digitalization.
 It is found that 70% of respondentsagree thatblackmoneystill existinIndiawhereas
only2% of respondentssayblackmoneydonotexistinIndiaand 28% are confused
theysay maybe it’sthere.
 It is found that 96% of respondents say the middle and the lower class people
affected the most by the demonetization, 6% of respondents say the high class
and remaining 2% says it’s none of them.
 It is found that 4% of respondents believe that the primary motive of
demonetization was finance, 48% believes that it was a strike against corruption,
44% believes it was a political move and remaining 4% believes there was other
motive behind demonetization.
 It is found that 40% of respondents say demonetization will not bring an end to
black money, corruption, terrorism and counterfeiting of currency.42% of
respondents says it will bring an end to black money, 6% says it will end
corruption, 2% says it will end terrorism and 10% says it will end counterfeiting
of currency.
 It is found that14% of the respondent are not sure whether demonetization leads
to the loss of employment, 78% says it leads to loss of employment and
remaining 8% says no to it.
 It is found that62% of majority respondents say that government have succeed in
promoting cashless economy to some extent, 22% think not at all, only 1% think
it’s completely successful and 14% are not sure in cashless economy.
 It is found that 42% of respondents can’t say whether demonetizations will
improve in quality of life of common man. 6% respondents completely agree that
it will improve the quality of life, 22% partially agree and rest 30% respondents
disagree to it.
 It is found that 90% of respondents says that they faced difficulty in using new Rs
2000 notes in the market and remaining 10% of respondents says no to it

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 It is found that 4% of respondents say demonetization has helped in curbing black
money, corruption and terrorism and 34% says no to it whereas the rest 62 % of
respondents says yes but believes that it needed better planning.
 It is found that24% of respondents strongly agrees that demonetization have been
implemented in a phase manner, 2% respondents strongly disagrees, 70%
respondents agree and remaining 4% respondents disagrees to the statement.