DEMONETIZATION, BUSINESS ENVIRONMENT, ECONOMIC ENVIRONMENT, POLITICAL ENVIRONMENT, ECOLOGICAL ENVIRONMENT,SOCIAL ENVIRONMENT, TECHNOLOGICAL ENVIRONMENT, LEGAL ENVIRONMENT, LIBERALIZATION, PRIVATIZATION, GLOBALIZATION, NEW ECONOMIC POLICY, NEW INDUSTRIAL POLICY, DISINVESTMENT, DIVESTMENT, DIVERSIFICATION, FOREIGN DIRECT INVESTMENT, FOREIGN INSTITUTIONAL INVESTMENT, MONETARY POLICY, FISCAL POLICY, FINANCIAL POLICY, INDUSTRIAL POLICY, FOREIGN EXCHANGE MANAGEMENT ACT, FOREIGN EXCHANGE REGULATION ACT, RESERVE BANK OF INDIA ACT, 1934; RECAPITULATION, etc.

1. DEMONETIZATION
CHARAK RAY
libra.charak@gmail.com

2. THE GOVERNMENT OF INDIA, MADE AN
ANNOUNCEMENT ON NOVEMBER 8, 2016 WITH
PROFOUND IMPLICATIONS FOR THE INDIAN
ECONOMY.

4. LEARNING OBJECTIVES
•Understand the concept of demonetization
• Examine the economic environment in India and the
impact of Government policies on business and industry.

6. Demonetization refers to an economic policy
where a certain currency unit ceases to be
recognized or used as a form of legal
tender. In other words, a currency unit still
loses its legal tender status as a new one
comes into circulation.

7. The two largest denomination notes, ‘500’ & ‘1000’, were
demonetized’ with immediate effect, ceasing to be legal
tender except for a few specified purposes such as paying utility
bill.
This led to eighty six per cent of the money in circulation invalid. The
people of India had to deposit the invalid currency in the banks
which came along with the restrictions placed on cash withdrawals.
Restrictions were placed on the convertibility of domestic money
and bank deposits.

8. WHAT ALL IS THERE IN
DEMONETIZATION ?

9. Demonetisation is viewed as a tax administration measure.
Indicating that tax evasion will no longer be tolerated or
accepted.

10. Demonetisation also led to tax administration channelizing
savings into the formal financial system.
cash-lite economy,

12. RECAPITULATION
Q-1 WHAT IS DEMONETIZATION?
Q-2 WHAT IS THE PURPOSE OF DEMONETIZATION?
Q-3 WHAT IS THE IMPACT OF DEMONETIZATION OF TAX
COLLECTION?
Q-4 HOW THE BUSINESS OF REAL ESTATE DECLINE AFTER
DEMONETIZATION?

16. DEMONETIZATION HISTORY
• Many countries have experimented with the process of
demonetization in the past. Some countries benefited
tremendously from the move while some terribly failed at
it.

18. Although the history of demonetization in India dates back to the time when various rulers ruled this country,
the freshest and most significant instances of demonetization in India are:
1. On 12th January 1946, 500, Rs. 1,000 and Rs. 10,000 notes were declared invalid as legal tender.
2. New notes of Rs. 1000, Rs. 5000 and Rs. 10,000 came into economy in 1954.
3. On 16th January 1978, the Morarji Desai led-Janata Party demonetized banknotes of Rs. 1000, 5000 and
10000. Note that, the finance minister at that time was H.M. Patel.
4. RBI introduced a new banknote of Rs. 500 into the economy in 1987 to contain inflation
5. 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.

19. The High Denomination Bank Notes (Demonetisation) Act, 1978
THE HIGH DENOMINATION BANK NOTES (DEMONETISATION) ACT, 1978
ACT NO. 11 OF 1978 [ 30th March, 1978.]
An Act to provide in the public interest for the demonetisation of certain high
denomination bank notes and for matters connected therewith or incidental thereto.
WHEREAS the availability of high denomination bank notes facilitates the illicit
transfer of money for financing transactions which are harmful to the national
economy or which are for illegal purposes and it is therefore necessary in the public
interest to demonetise high denomination bank notes;

20. RESERVE BANK OF INDIA ACT, 1934
• Legal tender character of notes. (1) Subject to the provisions of sub-section (2),
every bank note shall be legal tender at any place in 1 [India] in payment or on
account for the amount expressed therein, and shall be guaranteed by the 2
[Central Government]. (2) On recommendation of the Central Board the 3
[Central Government] may, by notification in the Gazette of India, declare that,
with effect from such date as may be specified in the notification, any series of
bank notes of any denomination shall cease to be legal tender 4 [save at such
office or agency of the Bank and to such extent as may be specified in the
notification].

21. 1. On which date Prime minister of India announced Demonetisation ?
07,November
13,November
09,November
08,November
19,November

22. In India for the first time demonetisation announced in which year ?
A.1946
B.1974
C.1999
D.1962

23. KEY WORDS
• End of the License-Permit-Quota Raj.
• Freedom in deciding the scale of business activities
• Making it easier to attract foreign capital and technology to India.
• Policy of planned disinvestments
• Dilution of stake of the Government in the public enterprise
• Increased level of interaction and interdependence among the various nations of the
global economy.
• Import liberalization, export promotion
• Tax evasion will no longer be tolerated or accepted.
• Rise in income tax collection because of increased disclosure

24. THANK YOU…