Demonetization initially disrupted rural agricultural markets in India due to a cash shortage. However, informal credit systems between farmers and retailers helped minimize the crisis. The government also took measures like allowing farmers to purchase seeds with old notes. As a result, demonetization had little impact on Rabi crop sowing and production. While cash transactions have largely returned to normal, suggestions are made to further promote digitization in rural areas through incentives to encourage cashless payments long-term.

1. Impact of demonetization, in rural marketing of agriculture-produce
and inputs, in Maharashtra and India
By
SHIVANAND RAI - Executive MBA – 4th SEMESTER
under guidance of
Dr. Vanishree Pabalkar, SIMS, Pune

2. Abstract
• The purpose of this dissertation is to evaluate the impact of
demonetization. Since the subject of demonetization is most recent,
relevant, appropriate and most important progressive historical event
ever in modern India.
• This has drastically and positively affected the ways and means of
marketing and consequently economy of India in a shortest possible
period of time.
• Hence I have decided to do a meaningful project report on the reasons
and impacts of demonetization in rural marketing of agriculture produce
and inputs.
• I am also associated with rural marketing of agriculture inputs for more
than two decades in India, so this subject is closely related with my field
of work.
• The present dissertation report provides the introduction, impact and
feedback of demonetization, in rural marketing of agriculture produce
and inputs in Maharashtra and India.

3. Introduction and Impact of demonetization- in Rural
Marketing of Agriculture produce and inputs – in
Maharashtra, India
• Demonetization is the act of stripping a currency unit of its status as
legal tender. The French were the first to use the word Demonetize, in the
years between 1850 -1855. Since then many countries have used the
word and the policy with immense restriction and discomfort, because it
disrupts economics and daily business transactions at large.
• Demonetization is also tried in other countries, however, there are no
examples that such an exercise having helped avoiding 100% of black
money, since, most of the money is kept in form of real estate, gold and
alike assets, which is also true for India.
• On recommendation of the central board of the Reserve Bank of India,
the central government has the power to declare any form of bank notes
ceases to be legal tender from the date mentioned in its Official Gazette.
Section 26(2) of the RBI Act, 1934 provides for this.

5. • 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 jewelry.
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 ₹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 ₹16.42 trillion
(US$240 billion) of which nearly 86% (around ₹14.18 trillion (US$210 billion)) were
₹500 and ₹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.
• Honorable Prime Minister Narendra Modi announced on November 8, that, at the
stroke of midnight, some 14 trillion rupees worth of 500 - and 1,000-rupee notes – 86%
of all the currency in circulation – would no longer be legal tender. With that, India’s
economy was plunged into chaos.

6. Moreover according to the study
by Mastercard Advisor’s
Measuring progress toward a
cashless society, India has a
long way to go for cashless
transactions because 98%
transactions were still in cash.

8. • Agriculture is impacted through the input-output channels as well as price and
output feedback effects. Sale, transport, marketing and distribution of ready
produce to wholesale centers or Agriculture Produce Marketing Council
(APMC – called Mandis), is dominantly cash-dependent.
• Disruptions, breaks in the supply chains feedback to farmers as sales fell,
increased wastage of perishables, lower revenues that showed up as trade
dues instead of cash in hand and when credited into bank accounts with
limited access affected the sector.
• The impact was visible in different sub-segments. Winter crops such as wheat,
mustard, chickpeas are due for sowing in a fortnight. Wheat prices were
already up due to low stocks and anticipated shortfall in 2016-17.
• Though the output had firmed up further as demonetization fallout pushed
traders to build more inventories. But even though the sowing of Rabi crop on
all India basis had increased by 27% so the Rabi 2016-17 yields which will be
now harvested in march April will also expected to increase.

9. Objectives
The objective of study is the in-depth analysis of, published papers, information
and articles on impact of demonetization in rural marketing of agriculture
produce and inputs as below :-
1. Study of present situation, and status on impact on fertilizer marketing,
consumption and sales of agriculture produce and inputs in Maharashtra, and
Maharashtra.
2. Feedback of focus groups consisting of farmers, retailers, dealers,
distributors and related persons with rural marketing on demonetization from
two districts – Pune and Solapur of Maharashtra.
3. Effect of demonetization – benefits and side effects.
4. Suggestions for improvement in digital and cashless rural marketing to
encourage long lasting effects of demonetization and make it fruitful with smooth
flow of agriculture produce and inputs like fertilizer and seeds.

10. Literature Review
The goal of this stage was to find out the history, implementation and
present status of demonetization from published articles and reports and
the impact of demonetization in the field of rural marketing of agriculture
produce and inputs including fertilizer marketing in India and Maharashtra.
I have gone through print and digital sources, and also reviewed relevant
literature. It provided an insight from the topic of similar concern.
The rural marketing environment of India keeps on changing therefore
there is a need to create awareness among farmers through special
promotional activities.
I reviewed following articles related to Demonetization, available online and
published in various print media including Business standard.
It has been observed that all the articles were having an inconclusive views
and with mixed opinion both in favor and some in opposing the decision.

11. 1. "Withdrawal of Legal Tender Status for ₹ 500 and ₹ 1000 Notes: RBI Notice
(Revised)". Reserve Bank of India. 8 November 2016.
2. "Here is what PM Modi said about the new Rs 500, Rs 2000 notes and black
money". India Today. 8 November 2016.
3. "Notes out of circulation". The Times of India. 8 November 2016.
4. Saikia, Bijoy Sankar (18 Nov 2016). "Demonetization may drag India behind
China in GDP growth, rob fastest-growing economy tag". The Economic Times.
5. "The dire consequences of India's demonetization initiative". The Economist. 3
Dec 2016.
6. Bhatt, Abhinav (8 November 2016). "Watch PM Modi's Entire Speech on
Discontinuing 500, 1000 Rupee Notes". NDTV India.
7. "Demonetization of Rs. 500 and Rs. 1000 notes: RBI explains". The Hindu. 8
November 2016.
8. "Sensex crashes 1,689 points on black money crackdown, U.S. election". The
Hindu.
9. "India demonetization: Chaos as ATMs run dry". Al Jazeera
10.c "Demonetization: Chaos grows, queues get longer at banks, ATMs on
weekend". 12 November 2016.
11."100 days of demonetization: Stories of hardship".
12."India: Demonetization takes its toll on the poor". Al Jazeera. 16 November
2016.
13."Demonetization Death Toll Rises To 25 And It's Only Been 6 Days". Huffington
post.
14."Demonetization: Opposition calls for countrywide protest on November 28". The
Indian Express. "Demonetization: Opposition parties join hands, to hold 'protest
day' on November 28". The Indian Express.

12. Methodology
• Secondary data from available information in print and digital media from
allover Maharashtra and India.
• The primary input have been collected by informal interview of focus groups of
various populations of farmers, retailers, distributors, opinion leaders,
government officials to find out factual feedback on demonetization and factors
influencing their feedback. The facts and figures have been also searched from
various websites and newspapers, and published articles related to the subject
of the project.
• The primary data obtained from the districts of Pune and Solapur from focus
group as detailed below.
• Duration of study – November 2016 to March 4, 2017.
• The primary data collected through focus group from total sample size of about
500 people have been analyzed from two districts Pune and Solapur, in
Maharashtra .

13. Analysis and interpretations
There is a major difference between the rural and urban economy which
cannot be ignored. Rural Indian communities are close knit and mostly deal
on trust.
Hence when they are aware that the times are testing money does not at
times come in between relations and even in transactions. Like a farmer in
need of seeds or fertilizers is given the same on a credit by the local
retailer or dealer. They support each other and put money behind for a
while.
This has minimized the crisis of non-availability of cash. But that does not
mean that they did not faced hardship due to cash crunch.
Moreover since now unavailability of cash was solved, sooner than
expected, which normalized the condition and people again going back to
cash transactions as before.

15. • The government’s initiatives such as allowing farmers to buy seeds
using old notes from the central and state-owned seed companies,
as well as from ICAR and central universities; instructing fertilizer
companies to sell soil nutrients on credit; allowing an additional two
months to repay crop loans due in November-December period,
have all perhaps helped this process.
• As a result of all these factors, the Rabi food grain output is likely to
be much higher and could be 7% higher than 2015-16, if the targets
are met. Therefore, the overall agricultural growth in 2016-17 could
be much higher despite a slowdown in food prices.
• There were apprehensions about farmers’ ability to purchase seeds
and other inputs. It now appears the demonetization has had little
impact on Rabi sowing.
• The informal institutional structures and the inter-linked markets in
rural India, where the suppliers advance inputs on credit and also
act as lenders appear to have cushioned the impact of
demonetization to a large extent.

16. QUESTIONNAIRE FOR FOCUS GROUP
OBJECTIVES
During informal discussions, primary data collected from total sample size of
approximately mixed population of farmers, sellers, distributor and retailers in rural
markets to know impact of following segments with total sample size of 500. In each
survey the feedback of more than 50 consumers and sellers were taken during
distributor’s and farmer’s conferences and in exhibitions of Digi Dhan Mela from
November 2016 to Mach 2017.
 Rural population of villagers and farmers.
 Medical stores
 Agriculture input sellers including fertilizers, pesticides and seeds, etc.
 Vegetable stores.
To do an informal survey through focus group, the following points were undertaken into
consideration :-
1. Demonetization on sales and consumption of products and agriculture inputs like
fertilizers and seeds.
2. Acceptance of demonetization and preference towards digital / cashless payment
methods.

17. QUESTIONNAIRE
A)Question to consumers - villagers and farmers groups.
Q1) did you faced cash crunch for purchase of fertilizers.
Q2) did you purchased less amount of fertilizers than required due to non-
availability of cash.
Q3) Dis you used cashless payments methods for purchasing required products
A)Questions to sellers and distributor groups.
Q1) Has Demonetization affected your business.
Q2) what was your preferred payment acceptance mode before Demonetization?
 Cash
 Debit card / Credit card
 Cheque
 E Wallet

18. Q3) did you switch to cashless mode due to demonetization?
 Yes
 No
Q4) how was your experience of using cashless payment mode?
 Good
 Bad
 Worst
Q6) which cashless payment mode do you prefer?
 Debit card / Credit card
 Cheque
 E Wallet
Q7) any problems faced due to cashless payment mode?
Q8) Are you willing to continue and promote cashless payment mode in future?
 Yes
 No

19. Primary data analysis of feedback received from focus group
The feedback have been taken from the focus groups
through informal discussions during various formal and
informal meetings, conferences, including the special
exhibitions to promote digital marketing and use of digital
money called Digidhan Mela, organized jointly by government
of India, State government, Agricultue department and Lead
fertilizer supplier, like Rashtriya Chemicals and Fertilizers
Ltd.
In case of Maharashtra. These various focus groups
consisted of farmers, retailers, dealers, distributors, opinion
leader and general public of rural and even of urban areas.

28. • The farmers and marketer of agriculture inputs, opinioned that demonetization
temporarily jeopardized their marketing activities, but the problem of cash
crunch was partially taken care off by way of credit sales by sellers which
eased out payment problems and consequently supported demonetization and
digitization.
• They opinioned that this will slowly empower India’s rural markets and
agriculture sector towards cashless economy and bring them at par with urban
areas.
• It has been observed that traders and progressive farmers have switched
temporarily to cashless mode of transactions due to non-availability of cash
but after normalcy they again came back to cash transactions.
• About 85% agriculture inputs dealers accepted old notes till 30th of November
2016, to help the farmers.
• About 65% of farmers sustained and unaffected from effect of cash crunch due
to availability of agricultural inputs on credit on their personal reputations and
credit extended by fertilizer companies to dealers.

29. Suggestions and recommendations
Now after stabilizing the effects of demonetization it is the need of the hour to
promote cashless transactions in urban as well as in rural markets by
incentivizing the use of cashless transaction to make the demonetization more
successful, as below.
1. There should be no charges levied for online or card transactions for five
years by banks or any other financial institutions.
2. The charges if any for cashless transaction may be subsidized and borne by
the government for next five years to promote cashless and digital transactions.
3. Most dealers and retailers prefer cash transaction to avoid taxes, so to
promote online transactions – there may be a 10% rebate for five years in income
tax on the profit generated through cashless transactions.

30. 4. Fertilizer companies are providing point of sales swipe machines called POS to
every fertilizer retail points free of charge across India. Similarly initially the
swipe machines at point of sales in rural markets should be provided to dealers
and retailers free of charge by the banks without any recurring charges to
promote cashless transactions.
5. Income tax may be levied 10% on the profit of more than Rs.10 Lakhs from
Agriculture income. It will help to account the agriculture income and large and
rich farmers will put cash in banks instead of keeping in hand.
6. Restriction and prohibitive limitations on cash transaction on more than Rs.1
Lakhs.
7.Opening of more number of customer friendly banks in rural areas.

31. Conclusion
It has been observed that despite initial hiccups, demonetization potentially
addressed the perennial problem of cash and credit in farm sector.
Now that the banking system glowing with liquidity, there can be increase in
investments in farm sector, which is the only way to get out of the vicious circle of
debt based farming.
Despite being declared as a ‘priority sector’ credit availability to typical farmers
for investment in their own lands are far from adequate. This has forced farmers
to rely on non-institutional credit, which further aggravates the problem.
It has been observed that growth story of agriculture is unexpectedly in-tact as
demonetization has insignificant effect on growth of output as well as farmers’
income.
Agriculture, which is largest informal sector of Indian economy, has shown
strong resilience to effect of demonetization.
Demonetization had, initially little impact on agricultural growth, by paralyzing the
rural economy but at the same time shown the way towards cashless alternatives
in rural economy.

32. It may be concluded that overall the rural population of India has supported and
favored demonetization movement of the government of India.
This is very clearly evident from the people’s recent verdict in favor of
demonetization in municipal elections in Maharashtra and particularly UP
assembly elections which is basically a farming state with vast rural population
dependent on agriculture and small scale industries in rural areas.
Today there are no residue complications visible of demonetization. The
marketing condition and availability of cash and cash transactions have almost
returned back to the pre demonetization periods.
However to make demonetization a success story – digitization movement must
be encouraged and supported by all, by including and actively involving
government machinery and the people towards a cashless and vibrant Indian
economy.
Further possibility will be explored, to published this dissertation report as a
paper in a rural marketing journal to reach out to larger audience.

33. References
1. http://www.moneycontrol.com/news/economy/impact-
analysisdemonetizationindia_8044821.html
2. http://www.livemint.com/Opinion/uvWqiyrOfSAnPgQBK0cQdM/Demo
netisation-and-the-rural-economy.html
3. http://www.insightsonindia.com/2016/11/16/big-picture-impact-
demonetization/
4. http://www.ideasforindia.in/Article.aspx?article_id=1735#sthash.fEBa
yUGH.dpuf,
5. Press Trust of India (PTI).
6. http://www.ideasforindia.in/Article.aspx?article_id=1735#sthash.fEBa
yUGH.dpuf
7.http://www.moneycontrol.com/news/economy/impact-
analysisdemonetizationindia_8044821.html
8."Demonetization a revolutionary step to fight corruption: Anna Hazare".
10 November 2016.
9. "President Pranab Mukherjee welcomes demonetization of Rs 1,000
and Rs 500 notes". India.com. 8 November 2016.
10. "Demonetization of Rs 1,000 and Rs 500 notes bold step: President