Demonetisation has been a radical, unprecedented step with short term costs and long term benefits. The liquidity squeeze was less severe than suggested by the headlines and has been easing since end-December 2016. A number of follow-up actions would minimize the costs and maximise the benefits of demonetisation. These include: fast, demand-driven, remonetisation; further tax reforms, including bringing land and real estate into the GST, reducing tax rates and stamp duties; and acting to allay anxieties about over-zealous tax administration. These actions would allow growth to return to trend in 2017-18, following a temporary decline in 2016-17. Prime Minister of India Narendra Modi announced the demonetisation 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 ₹500 and ₹1000 banknotes of the Mahatma Gandhi Series would be invalid past midnight, and announced the issuance of new ₹500 and ₹2000 banknotes of the Mahatma Gandhi New Series in exchange for the old banknotes. Initially, the move received support from several bankers as well as from some international commentators. It was heavily criticised by members of the opposition parties, leading to debates in both houses of parliament and triggering organised 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 demonetisation was heavily criticised by prominent economists and by world media. 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. The move was heavily criticised as poorly planned and unfair, and was met with protests, litigation, and strikes. 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. Prime Minister Narendra Modi’s shock announcement had led to a rush in banks by people and business houses to exchange the old notes, besides sparking a crippling currency shortage

1. Demonetisation
Presented by
Akshay Kumar Sethia
Registration No. A01-1112-1428-
14
Roll No. 14-300-3-01-0413
Under the guidance of
Prof. Sremoyee Guha Roy
Assistant Professor
St. Xavier’s College
-Journey Of BLACK Turning WHITE

2. Contents
2016
Various modes of payment
Demonetisation
Effects
Merits & Demerits
History
History in India
Objective of the study
Research Methodology
Analysis
Evasion Attempts in India
Sectors Affected
Expert Speak
Benefits
Support
Opposition
Conclusion
Way forward
2

3. 2016
3

4. Various modes of Payment
Barter System- Inevitably, low-income and rural households have been hardest hit
by Government’s currency reform. Barter economies have reportedly sprung up in
many towns and villages.
Cash- India’s economy relies predominantly on cash. An estimated 600 million
Indians—nearly half the country’s population—are without a bank account. Three
hundred million have no government identification, necessary to open an account.
E-Payment- The content of this exchange is form of digital financial instrument
(such as encrypted credit card numbers, electronic cheques or digital cash) that is
backed by a bank or an intermediary, or by a legal tender.
4

5. Demonetisation
Demonetization is the act of stripping
a currency unit of its status as legal
tender.
There are multiple reasons why
nations demonetize their local units
of currency:
• Liquidity & Inflation
• Counterfeiting
• Black Market/ Money Laundering
• Organised Crimes/ Terrorism
• Other Economic emergencies
5

6. Effects
Parallel
Economy
Money
Supply
Demand Prices
Economic
Entities
Gdp Bank
Online
Transaction
6

7. Merits and Demerits
Merits
Unaccounted
Money
Terror Funding Accountability
Demerits
Chaos Costly
Other
Sources
Poor
People affected
7

8. History
Successful
US 1969
Britain 1971
Australia 1996
European Union 2002
Zimbabwe 2009
Unsuccessful
Ghana 1982
Nigeria 1984
Myanmar 1987
Zaire/Congo 1990
Soviet Union 1991
Others
Singapore(1945)
Fiji(1969)
North Korea(2010)
Philippines(2015)
Venezuela(2016)
8

9. History in India
On 12th January
1946, 500, Rs. 1,000 and Rs.
10,000 notes were declared
invalid as legal tender.
New notes of Rs. 1000, Rs.
5000 and Rs. 10,000 came
into economy in 1954
On 16th January 1978, the
Morarji Desai led-Janata
Party demonetized banknotes
of Rs. 1000, 5000 and 10000.
RBI introduced a new
banknote of Rs. 500 into the
economy in 1987 to contain
inflation
On 8th November 2016, the
old banknotes of Rs. 500 and
Rs. 1000 were barred from
being legal tender and new
notes of Rs. 2000 were soon
introduced
9

10. Objective of the Study
The study aims at:-
• To study Role of Demonetization.
• To examine the effects of demonetisation in the long run and short run.
• To study the journey of India on becoming a cashless economy.
• To study the benefits of Demonetisation.
• To study rationale behind the demonetisation drive.
• To examine whether the objectives pointed out by the GOI as corollary to the
demonetization process can be achieved by it in reality.
• To analyse whether demonetisation does more harm than good or the other way
round.
10

11. Research Methodology
Conceptual understanding is developed from relevant research based books, articles, reports and
other existing literature.The study is based on primary & secondary sources of data/information.
Different books, journals, newspapers and relevant websites have been consulted in order to make
the study an effective one. The study attempts to examine the Effect of Demonetisation in India.
Primary data is collected through well- structured questionnaire. Samples of 80 respondents in
Kolkata have been selected by using random sampling method. The collected information were
reviewed and consolidated into a master table. For the purpose of analysis the data were further
processed by using statistical tools. Opinions of academic experts were also sought to capture
view and perceptions on demonetisation. Secondary data has been collected from the leading
financial newspapers, periodicals and relevant websites
11

12. Primary Data Analysis
Primary data is collected through well- structured questionnaire. Samples of 80 respondents in
Kolkata were received. The questionnaire was designed using google forms. The questionnaire
consisted of 15 questions. The responses were recorded electronically and analysis of the results
are presented below.
We divide the preliminary analysis into two broad section: Demographic Analysis and Subject
Analysis. The Demographic analysis will focus on the type of people surveyed which will decide the
target group of people. On the other hand the subject analysis will focus on specific questions
related to the study.
12

13. Demographic Analysis
18-30yrs
96%
31 yrs and above
1%
Below 18
3%
Age group
13
Above 5 lakh
5%
Below 5 lakh
26%
No income
69%
Income group
8
2
70
Salaried
Self employed
Student
0 10 20 30 40 50 60 70 80
Occupation

14. Subject Analysis
Maybe
20%
No
17%
Yes
63%
Do you believe in the concept of "Cash-
Less" Economy?
14
65
13
16
74
54
0 10 20 30 40 50 60 70 80
Mobile wallet
Unified Payments Interface (UPI)
USSD based Mobile Banking
Credit Cards/ Debit Cards
Internet Banking
Nature of transaction
Maybe No Yes
Total 15 15 50
15 15
50
0
10
20
30
40
50
60
Do you think Demonetisation was good
for the economy

15. 15
25
50
5
0 10 20 30 40 50 60
Good motive ,Successful
implementation
Good motive, unsucessful
implementation
Ulterior motive
Good motive
,Successful
implementation
Good motive,
unsucessful
implementation
Ulterior motive
Total 25 50 5
How do you view this Demonetisation
drive
Maybe
24%
No
40%
Yes
36%
Do you think Demonetisation was an eye-wash
Maybe No Yes
Total 18 48 14
18
48
14
0
10
20
30
40
50
60
Was this move made just to influence the
election in various states

16. 16
Maybe
26%
No
20%
Yes
54%
Was RBI taken into consideration?
Maybe No Yes
Total 12 22 46
12
22
46
0
5
10
15
20
25
30
35
40
45
50
Do you think that Demonetisation will have
good results in the long run?
Maybe
24%
No
36%
Yes
40%
Demonetization will bring real estate,
higher education, healthcare in common
man's reach.

17. Maybe No Yes
Total 18 22 40
18
22
40
0
5
10
15
20
25
30
35
40
45
Is the Remonetisation task over or it will take
some more time
17Middle Class Poor Class Rich Class
Total 46 22 12
46
22
12
0
5
10
15
20
25
30
35
40
45
50
Whom do you think the move has
affected the most in the hierarchal
ladder of India's economy? The rich, the
middle class or the poor?
1 2 3 4 5
NO OF REPONDENTS 7 13 28 22 10
7
13
28
22
10
0
5
10
15
20
25
30
Overall, what do you think about the
government's moves to tackle black
money?

18. • In general the reply was- The main objective of demonetization is to promote digitization.
Digitization of most of the transaction will be directly included in the GDP which is not currently
included. If the transaction will be routed through banking system, how much a person earned
from which source and how much he expanded where can be easily ascertained. It may be
predicted that in future tax structure may be reduced and a lower tax rates will be charged. Along
with GST, demonetization will have vital impact on Indian economy in the long run. The move was
good but lacked adequate execution. A proper planning was needed before implementation.
Moreover one of the motive according to me is to gain vote in upcoming election of 2019. This
move severely affected the middle class.
• Demonetisation.docx
• Demonetisation.xlsx
18

19. Secondary Data Analysis
14 lakh
crore
86%
Demoneti
sed
currency
55
People
died
10000
Indian
1 branch
per
132834
branch
in
38% rural
area
No bank
account
165
million
have
19
120
crore-
paytm
7 million
transactio
n
Old
notes
piled
300^Mt
everest
18 Atm
100000
adults
access to
1.28 lakh
crore
Cost in 50
days
Post sbi
1.2 trillion
deposited
+60%Credit card
11
Billionare
s
+16%
wealth
-30/40%cigarette
E-
cimmerce
-30% Cod
+108%Debit card

20. 20
Overall
industrial
output
-1.9% Food
inflation
3.22% in
oct
2.11% Retail
inflation
4.2% in oct
3.63%
Ratio of
currency to
GDP
10.8% Railway
tickets
Booked
Digitally
58%
Discount by
Irctc for
digial
booking
other
service
5% Discount by
irctc
through
booking
0.5%
Amt
avaialable
with public
for carrying
transaction
-60% Bank A/c
linked with
aadhar of
urban
household
91% Of
household
have
atleast 1
bank a/c
99%
PoS
installed in
Railways
465 Mobile
ATMs
deployed in
India
834 Demonetis
ed
cuurency
received
back
97%
ATMs per
1000sq km
61.88

21. 21
•70% mobile+ D2H recharge
•+200% app download
•+250% transaction value
•+30% saved cards
•Hits 5 million transaction per day over 24000crore
Paytm
•Kochi
•Enquiries doubling to 1000
•Age group 24-35
Monkyasa.com
•Delhi
•20000 to 32000 per dayAstrobuddy
•Askmonk.com, astrobuddy, Monkyasa.com, iZofy.com
•+40-50% inquiries
Online astrology
startups
•+7000% surge in transaction
•Mainly Lemontree, makemytrip, Indigo,Big basket,
Groffers
Mobikwik
•Food technology startup
•Mumbai based
•Accepted old notes
•Orders tripled
Box8
•Chennai based cab aggregator
•Accepted old notesUTOO
•E-commerce startup
•Delivers fresh fish and meat
•I owe you scheme
•Means order now pay later
FreshToHome
•Ola credit
•Allows 7 days creditOla
•Online medical industry
•1 week credit to
•Those who order more than thrice a week
SupplyThis
•New delhi based online gocery
•Short term credit upto rs1000
•Who have shopped more than 10 times
FreshFalSabzi
•Fashion e-commerce platform
•Two weeks creditStyle Cracker
•Haryana, Delhi, UP
•Charges on hourly basis
•Stands in ATM line for you
•90 for 1 hour and discount further
Bookmychotu
•Bengaluru based food startup
•Accepted old notesNight café

22. Evasion attempts in India
Gold Purchase
Doantion in Temples
Multiple Bank Transactions
Railway Booking
Municipal Tax Payment
Backdated Accounting
22

23. Sectors Affected
Positives
•E-commerce and Fintech
•Payment gateways
•Cards
•Mobile wallets
•Online retail stores
•Net and payment banks
•e-marketplace
Negatives
•Agriculture
•Luxury goods
•Real Estate
•Commodities
•Traditional Retail
23

24. Expert’s Speak
• The long term gains are in terms of
1. Reduction in the proportion of pure cash transactions, and
2. A Shift to digital mode of payment,
3. Leading to Recording of all transactions, and
4. Thereby helping to widen tax net.
• ….note ban cannot be a standalone measure to prevent further accumulation of black money as it depends on
future policies of the government such as
1. Improved transparency in governance,
2. Revised tax structures and administration, and
3. Electoral reforms including funding for political parties.
• C Rangarajan,
• Former RBI Governor,
• 32nd Conference of All India Reserve Bank Employees Association,
• Hyderabad, Feb 17, 2017
24

25. Benefits
Proposal
Benefits
Direct
Benefits
More
Possibilites
Individual
Benefits
Businessman Farmer
Self-
Employed
Salaried
Employee
Doctor
IT
Professional
25

26. Proposal Benefits
Direct Benefit
• Savings in amount of taxes paid.
• No tax returns & No tax compliance cost.
• Adequate tax revenue for each level of
Government. (Center, State and Local)
• Transparency in the Economy.
• Significant drop in commodity prices.
• Loans from banks at lower rates.
• Substantial Reduction in construction cost.
• Terrorist and anti-national activities can be
controlled.
More Possibilities
• Opportunities for corruption will be minimized.
• Direct subsidy benefits for all the needy.
• Good infrastructure across the country.
• Significant growth in each sector i.e.
Industry, Agriculture and Service.
• Significant growth in employment.
• Social security wherever needed.
• Focus shift for business from tax manipulation to
Innovation.
• Indian business will become globally
competitive.
26

27. Businessman
No separate
arrangement for tax
payment.
Easy availability of
capital.
Increase in foreign
investments.
Fair and healthy
business competition
Make up of import-
export imbalance.
Long term business
decisions.
End of risk of floating
money.
27

28. Farmer
Efficient marshalling
of natural resources.
Improved efficiency
of the agriculture
sector.
Easy access to credit
at low rates of
interest.
Latest technology and
new techniques.
Profitable business.
Can stand up for
foreign competition.
Additional source of
income.
28

29. Self Employed
No separate
arrangement for tax
payment.
Easy availability of
capital.
Virtually equal price
level throughout the
country.
Long term business
decisions.
End of risk of floating
money.
Increase in profit.
More focus on service
and quality.
29

30. Salaried Employee
Less tax deduction
from salary.
Job security for me.
Growth in desired
career.
Increased purchasing
power.
Comfortable day to
day life.
More employment
opportunities.
Prosperous life.
30

31. Doctor
Availability of more
seats for education.
Reduced education
cost.
Reduced cost of
infrastructure.
No need to pay taxes
separately as they are
automatically cut.
Credibility established
as tax payer
professional.
Affordable treatment
cost for patients.
More opportunities
for research.
31

32. IT Professional
No botheration about
taxes at all.
Good infrastructure
support.
Lot of business
opportunities.
Secured Life.
Corruption free and
reliable system to
work with.
Organizations will be
free of heavy taxes.
Good quality
education.
32

33. Support
The decision met with mixed initial reactions Several bankers like Arundhati Bhattacharya (Chairperson
of State Bank of India) and Chanda Kochhar (MD & CEO of ICICI Bank) appreciated the move in the sense that
it would help curb black money. Businessmen Anand Mahindra (Mahindra Group), Sajjan Jindal (JSW
Group), Kunal Bahl (Snapdeal and FreeCharge) also supported the move adding that it would also accelerate e-
commerce. Infosys founder N. R. Narayana Murthy praised the move.
Finance Minister Arun Jaitley said that demonetisation would clean the complete economic system, increase
the size of economy and revenue base. He mentioned the demonetisation along with the upcoming Goods
and Services Tax (GST) as "an attempt to change the spending habit and lifestyle."
The Indian National Congress spokesperson Randeep Surjewala welcomed the move but remained sceptical
on the consequences that would follow. Chief Minister of Bihar Nitish Kumar supported the move
33

34. Opposition
A Congress-led opposition, which includes 13 political parties, opposed the current government on the
demonetisation issue in the Winter Session of the Indian Parliament on 16 November 2016. The Chief Minister
of West Bengal Mamata Banerjee also met the President Pranab Mukherjee to oppose the demonetisation.
The debate on demonetisation is known to be initiated by Indian National Congress and Anand Sharma in
the Rajya Sabha on 16 November 2016, while Banerjee is known to be the first to oppose the current
government on the demonetisation.
On 16 November 2016, Banerjee led a rainbow delegation comprising political parties of Trinamool
Congress, Aam Aadmi Party, BJP ally Shiv Sena, Patidar Anamat Andolan Samiti (of Hardik Patel) and National
Conference to Rashtrapati Bhawan to protest against the decision to withdraw the ₹500 and ₹1000 banknotes.
34

35. Conclusion
Encouraging Cashless Transaction.
Lucky draw to encourage Digital Payment.
IT raids.
More than 3500 notices sent.
Citizens turn watchdog.
Pradhan Mantri Garib Kalyan Yojna.
New Action against Benami Property holders.
Penalty for possession of demonetized notes
35

36. Way Forward
Details of foreign bank account & asset holders, forex etc.
Jewellery/ Precious Metal Conversions
Benami Property/ Accounts
Digitisation of Indian economy and Transaction transparency
Transformation to a CASH LESS ECONOMY
36

37. 37

38. References
1. http://www.investopedia.com/terms/d/demonetization.asp
2. http://www.arthakranti.org/about-arthakranti
3. https://en.wikipedia.org/wiki/Anil_Bokil
4. http://indiabudget.nic.in/es2016-17/echap03.pdf
5. http://www.dailyo.in/business/demonetisation-currency-change-narendra-modi-bjp-infographics-atm-
bank-rural-urban-paytm/story/1/14236.html
6. http://thetimeliners.com/demonetization-india-timeline
7. http://indianexpress.com/article/business/economy/demonetisation-a-
https://zenodo.org/record/252271/files/44.PDFtimeline-of-govt-announcements-amendments-4381684/
8. https://qz.com/846454/timeline-20-days-of-demonetisation-narendra-modis-biggest-gamble-with-the-
indian-economy/
9. http://newsilike.in/the-journey-of-demonetization/
10. https://www.valueresearchonline.com/story/h2_storyView.asp?str=32446
38

39. 11. https://blog.wisdomjobs.com/impact-demonetization-across-sectors/
12. http://timesofindia.indiatimes.com/india/demonetisation-impacts-indias-billionaire-club-mukesh-
ambani-richest/articleshow/57520281.cms
13. http://www.hindustantimes.com/business-news/demonetisation-fallout-2400-bank-branches-report-
suspicious-transactions-in-nov-dec/story-rPtM3VrYhepestSmFPNd0N.html
14. http://data.conferenceworld.in/SGTB/P680-685.pdf
15. https://zenodo.org/record/252271/files/44.PDF
16. http://indiatoday.intoday.in/story/air-india-government-currency-northeast/1/843854.html
17. http://indianexpress.com/article/business/economy/demonetisation-50-days-74-notifications-central-
government-narendra-modi-reserve-bank-of-india-rbi-rules-cash-crunch-ban-4452455/
18. http://timesofindia.indiatimes.com/50th-day-of-demonetisation-top-10-
developments/listshow/56217036.cms
19. http://www.livemint.com/Politics/9XNrKKKjknca6owQm8qm7K/Demonetisation-impact-by-numbers-as-
of-14-December.html
20. http://blogs.wsj.com/indiarealtime/2016/11/08/full-text-of-indian-prime-minister-narendra-modis-
speech-on-replacing-largest-rupee-notes/
39