The document discusses the history and rationale behind demonetization and the move towards a cashless economy in India. It notes that high-value banknotes like Rs. 500 and Rs. 1000 had increased disproportionately compared to economic growth, and were being used for illicit purposes like money laundering and tax evasion. Demonetization aimed to curb the circulation of such notes and black money. While it had short-term costs, benefits included reducing fake currency, terror funding and inflation. The government also aims to promote digital and cashless transactions through initiatives like Digital India, Aadhaar and the Unified Payments Interface to improve governance and service delivery.

3. THE TRUTH BEHIND
DEMONETIZATION
&
CASHLESS ECONOMY

4. THE HISTORY OF NOTE BAN

5. • January 1946- Rs.1,000 and Rs.10,000 banknotes, which were in
circulation were demonetized primarily to curb unaccounted
money.
• 1978- The higher denomination banknotes in Rs 1,000, Rs 5,000
and Rs 10,000 were reintroduced in the year 1954 and these
banknotes were again demonetized in January 1978.
• Denominations of 1, 2, 3, 5, 10, 20 & 25 paise were in circulation
till June 30, 2011 but were then withdrawn. While the 50 paise
coins are still in circulation. They are called small coins while
the other denominations are known as rupee coins.

6. WHAT & WHY DEMONETIZATION
• It is an act of stripping a currency unit of its status as a legal tender.
• While the increase in the circulation of notes of all denomination had
grown by 40% between 2011-16 , those of 500 had increased by 76% &
those of 1000 had increased by 109%. But the economy had expanded
by a merely 30% in this period.
• This shows the disproportionate increase in high denomination notes.
• According to RBI as of march 2016, currency in circulation amounted
to ₹ 15,000 billion /15 lakh crore.
• Of these notes ₹500 &₹1000 notes accounted for 47.8% & 38.6%
respectively.
• Together they were more than 86% of the value of the notes that in
circulation.

7. • A Centre for Media Studies report showed that nearly Rs 30,000 crore
was spent during the 2014 general election, while official spending
only accounted for Rs 7,000-Rs 8,000 crore.
• Financial action task force that looks at the criminaluse of
international financial system notes that high value notes are used in
money laundering, drug business & human trafficking etc.
• The paper that RBI & Pak Govt uses is same & supplied by a London
based company hence the threat of fake currency.

8. WHAT COULD HAVE BEEN DONE INSTEAD
• We can make it difficult or coastly to print fake currency.
• The cost to print a ₹1000 note is ~₹3 i.e. 0.3% of the face value , where
as to print a ₹10 note it costs ₹0.96 i.e. 9.6 % of its face value.
• The highest denomination note in Indian Economy should be ₹250 as
it the average amount spent by an Indian per day .
• ₹500 & ₹1000 notes should be banned permanently.
• Gain is less & pain is huge.

9. BLACK MONEY
• Nothing but the unaccounted money for which no tax is given.
• The drivers & dynamics of illicit financial flows from inda :1948-
2008(Dev Kar) states that India lost a total of $ 213 billion due to
illicit flows in the period. The total volume of illicit assets held abroad
represents about 72% of the size of india’s ‘under ground economy’
which has been estimated at 50% of india’s GDP.
• World bank report: year 2000- 23.1% of GDP, year 2007- 20.7% of
GDP. This is a huge number and has to be tackled. only 6% in the
form of cash.

10. • Around 15 lakh crore is in circulation, and RBI has the record.
• The amount of money that wont return to RBI that will be black
money, this gap will have a positive side as it will improve the cash
reserve for govt. which can be used for various projects and
developments.
• If the value is large enough it is a good sign for the Govt.
• However by many wrong ways these money are brought back to the
RBI in may ways like using PMJDY accounts, by distributing among
poor , donation to temples, jewellery purchase with fake bill etc.

11. MAJOR BENEFITS
• The demonetization of old 500& 1000 rupee notes would have leap in long
term benefits which could be classified as direct & indirect impact on our
economy.
• Direct impact:
• Fake currency out of circulation in a single stroke.
• Hawala sources dried up, terror fundings and terror activities reduced.
• Reduction in inflation.
• Easy availability of laons with low interest rates.

12. • Indirect impacts :
• Kashmir moves to normalcy-
blow of insurgency, no more
schools being bumt & no tone
patters found.
• Use of apps & cards –initial step
towards digitization in india
with the involvement of small
vendors leading to transparency
in the system.
• Simplification of tax policies &
reduction in tax rates in the
upcoming years.
• Increase in tax collection rates

15. EFFECT ON INDIAN ECONOMY
• There is a talk among the manufacturers of 2 wheelers, sold mostly in
rural areas that thay will soon scale down production and reduce the
no. of work shifts for some months at least.
• The construction sector is expected to be hit the worst and this impact
the sale of construction materials such as cement and steel.
• Trade and manufacturing bodies have reported an over 50% drop in
economic activity due to the monetary shock. (0.5% drop in GDP )
• The rabi sowing season is in chaos as farmers are lining before banks
for cash to buy seeds, fertilizers and other materials, and have already
lost half of the 20 day window available for sowing. Productivity of
rabi crops will be much lower this time. This could casuse both a
demand and supply shock in the medium term.

18. THE MONEY LAUNDERERS
• PRAYERS ANSWERED : with temple hundis declared exempt, priests
did brisk business converting black money to white, of course for a fee.
• MILKING THE POOR : the poor stood in queues to deposit cash for the
rich- into their own accounts. To be returned later for a small cut.
• LAND DEPOSITED : land owners made a quick buck by accepting old
currency for backdated sales, and later giving buyers a refund.
• GOLD RUSH : many thronged jewellery shops right after the PM’s
announcement. And their CAs had sleepless nights.
• FARM APPEAL : agricultural income is tax- free, as soon as shady
dealers realised this, farmers began appearing in ques to deposit stacks
of cash

19. • REAL SUFFERERS : home makers , daily wagers , poor peple , aam aadmi
• VIOLATION OF FUNDAMENTAL RIGHTS : daily wagers who would have earned
is standing outside of the ATM to get their money.(13 crore people)
• It will fight black money but only for a small portion which are in the form of cash
• The fake currency cant be eradicated forever, corruption cant be stopped in a single
night.
• TOWARDS A CASHLESS ECONOMY : no such thing of cashless economy in the
world.
name of country GDP in trillion % of GDP as cash
USA $ 21 8.6
CHINA $ 14 12.7
JAPAN $ 4.5 11
INDIA $ 2.25 22

20. • Soldiers at the border.
• Queues outside multiplexes, rock concerts why not outside banks?
• Lawful??
• The famous economist John Maynard Keynes had said “ In the long
run we are all dead”. It was said that the nature of the current
demonetization may even kill us in the medium term!!

21. STAGES THAT LED TO
DEMONETIZATION

22. THE IDEA BEHIND CASHLESS SOCIETY
• Why such situation occur?
• Emerging challenges in governance
• Outline of the possible solutions
• Transformational schemes : DIGITAL INDIA
• The road ahead

23. SOME KEY ASPECTS OF THE PROCESS OF
GOVERNANCE
• How to identify beneficiaries?
• How to empower them?
• How to reach out to them?
• How to minimize leakage while doing so?
• How to record everything &secure it?
• How to scale it up?

24. ANNUAL SUBSIDIES BILL OF GOI

25. PROBLEM TO
IDENTIFY!!
In India it is very difficult to
identify a person specifically as
there are multiple identity
cards like passport, voter id
card, ration card , driving
licence etc

26. ESTIMATED LEAKAGES IN PDS

30. OUTLINE OF THE POSSIBLE SOLUTIONS
• We need a comprehensive approach that spans the complete
problem.
• Technology is the key.
• Integration of technology in govt. process is e-Governance.
• Due to fundamental shifts in technology in past 5 years, the
entire model has to change .Hence the new digital India
programme.
• This programme required a massive grass root of basic
processes.
• Need of making a unique identity for all.

31. EFFECTIVE & EFFICIENT GOVERNANCE
Soft infrastructure
Schemes + Subsidies + Processes
Design-Delivery-scaling-security-efficiency
-------------------------------------------------------------------------

32. • The aim of JAM is to directly transfer subsidy to the intended
beneficiaries thereby eliminating intermediates & leakages. Hence the
economic life of poor will significantly improve .
• However everything can’t be done through DIRECT BENEFIT
TRANSFER (DBT), especially when physical identity check is
required in PDS , then we will need BAPU i.e. Biometrically
Authenticated Physical Uptake.
• To reduce leakages in LPG , the PAHAL scheme was introduced .

33. DIGITAL INDIA
• It is a mega vision that links everything.
• Govt. programme of building a National Optical Fiber Network
(NOFN) worth 1 lakh Crore.
• 7000 KM of fiber network across the country in three years time span.
• 2.5 lakh gram panchayats to be connected .
• Mukesh Ambani company reliance did this step by 2010 by making a
fiber optics network of over 80,000 km , the profit he is getting today (
Jio )

34. • Some of the visionary areas of Digital India are : eKranti, NeGP 2.0,
The India Stack etc.
• India Stack is a complete set of API ( Applicaion Programming
Interfaces ) which leads to development of payment apps.
• It is an open API stack build as a public good.
• It is made available under the open availability policy ( JAM trinity
architecture)
• UIDAI , CCA , NCPI

39. THANK YOU !!
Presented By:
ASHISH K GOUDA
COGNIZEN
NITRKL