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Demonetization And Its effects on Indian Economy

Published in: Economy & Finance
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  1. 1. Demonetisation And Indian Economy
  2. 2. • Meaning - Demonetisation is the act of stripping a currency unit of its status as legal tender • It is the process of ceasing to produce and circulate particular forms of currency • Examples for demonetised countries • Zimbabwe • Australia • Libya • Iraq
  3. 3. • Many developed countries gave positive response on demonetisation • Anil Bokil : The man behind demonetisation Stages lead to demonetisation • Pradhan Mantri Jan Dhan Yojana Total 25.98cr Bank accounts has been opened • Income Declaration Scheme Total amount of Rs.65,250cr has been disclosed
  4. 4. BACKGROUND OF DEMONETISATION • Indian rupee is the official currency of republic of India. • Reserve bank manages currency in India. • The rupee is named after silver coin, RUPIYA, first issued by Sultan Sher Shah Suri. • In 2010 a new symbol was officially introduced. It was derived from the combination of Devanagari consonant “र” (ra). • The first series of coins with the new rupee symbol started in circulation on 8th july 2011.
  5. 5. • India’s first demonetization was in January 1946 and again in 1978. • The highest denomination note ever printed by the Reserve Bank of India was Rs 10,000 note in 1938 and again in 1954.
  6. 6. • Rs1000 and Rs10,000 banknotes were in circulation prior to January 1946. • Rs1000 note made a come back in November 2000, and Rs500 came into circulation in October 1987. • In October 1987 Rs.500 banknotes was introduced with the portrait of Mahatma Gandhi. • Rs 50 and Rs 100 banknotes were issued in August 2005, followed by Rs500, Rs1000 denominations in October 2005, and Rs10 and Rs20 in April 2006.
  7. 7. OBJECTIVES FOR DEMONETIZATION • Increased fake currency notes. • Fake notes used for anti national and illegal activities. • Misused by terrorist for hoarding black money. • Non disclosure of source of income. • Corruption
  8. 8. POSITIVE IMPACT • It is a positive shock to the Indian economy and society. • This will send a strong signal about the Indian anti corruption drive. • Money flow becomes systematic and controllable through banking transaction. • Raising use of credit/debit cards, net banking and other online payment mechanism. • In the immediate run, we are likely to witness larger bank deposits, price correction and better tax possibilities in the economy. • Tax revenues will increase. • Increase in GDP.(long-term)
  9. 9. NEGATIVE IMPACT • As of current reports GDP declined drastically. • Ongoing activities will be difficult to progress. • Purchase of fertilizers and agro products. • Even it could affect E-commerce companies. • It affects day to day transaction. • It effects a large number of employees. • Heavy work load to bank employees.
  10. 10. • Difficult to manage emergency situations. • It effects unorganized sectors for payments. • People may start to save black money in form of gold, properties, silver. • Foreign travelers will get effected. • It effects rural area people. • It effects real estate, financing. • It affects liquidity position in country.
  11. 11. Challenges faced by banks • To ship enough money into economy. • ATMs are to be reconfigured. • Overload to employees. • Difficult to handle customers. Challenges faced by government • To overcome criticisms. • To improve demonetisation move. • To avoid illegal practices. • To bring cash-less mode economy.
  12. 12. DEMONETISATION EFFECT ON STOCK MARKET • BSE Sensex opened with a massive loss • Rupee appreciation in the Foreign exchange market is also expected. • Lot of investors are withdrawing capital from stock market. • On Consumer Discretionary stocks. • On Pharmaceutical stocks.
  13. 13. CONCLUSION • Cash less economy • Educate the people in the subject of use of electronic cards will be required • Helps in restriction of Corruption and terrorism • Other countries also decided to go for demonetization • Rupee value is appreciated