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    Field of Study: Management Major In: Business Administration Profile: General in Acadamic

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    This document analyzes the effects of India's 2016 demonetization policy, which removed Rs 500 and Rs 1000 banknotes from circulation. [1] It discusses how the policy aimed to reduce black money but ultimately failed to do so, as 99.3% of demonetized notes were deposited in banks. [2] The policy had negative economic impacts, including drops in GDP growth, industrial production, and agricultural prices and wages. [3] While some initially supported the policy, it faced significant criticism for being poorly planned and unfair to the public. The conclusion is that demonetization was the wrong policy and caused major disruption without achieving its goals of reducing black money.

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    Field of Study: Management Major In: Business Administration Profile: General in Acadamic

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    Mit Mecwan
    27 views9 pages
    This document analyzes the effects of India's 2016 demonetization policy, which removed Rs 500 and Rs 1000 banknotes from circulation. [1] It discusses how the policy aimed to reduce black money but ultimately failed to do so, as 99.3% of demonetized notes were deposited in banks. [2] The policy had negative economic impacts, including drops in GDP growth, industrial production, and agricultural prices and wages. [3] While some initially supported the policy, it faced significant criticism for being poorly planned and unfair to the public. The conclusion is that demonetization was the wrong policy and caused major disruption without achieving its goals of reducing black money.

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    This document analyzes the effects of India's 2016 demonetization policy, which removed Rs 500 and Rs 1000 banknotes from circulation. [1] It discusses how the policy aimed to reduce black money but ultimately failed to do so, as 99.3% of demonetized notes were deposited in banks. [2] The policy had negative economic impacts, including drops in GDP growth, industrial production, and agricultural prices and wages. [3] While some initially supported the policy, it faced significant criticism for being poorly planned and unfair to the public. The conclusion is that demonetization was the wrong policy and caused major disruption without achieving its goals of reducing black money.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    27 views9 pages

    Field of Study: Management Major In: Business Administration Profile: General in Acadamic

    Uploaded by

    Mit Mecwan
    This document analyzes the effects of India's 2016 demonetization policy, which removed Rs 500 and Rs 1000 banknotes from circulation. [1] It discusses how the policy aimed to reduce black money but ultimately failed to do so, as 99.3% of demonetized notes were deposited in banks. [2] The policy had negative economic impacts, including drops in GDP growth, industrial production, and agricultural prices and wages. [3] While some initially supported the policy, it faced significant criticism for being poorly planned and unfair to the public. The conclusion is that demonetization was the wrong policy and caused major disruption without achieving its goals of reducing black money.

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    ALCIDE GASPERI UNIVERSITY OF

    EUROREGIONAL ECONOMY, JOZEFOW


    FACULTY OF SOCIAL SCIENCES

    FIELD OF STUDY: MANAGEMENT


    MAJOR IN: BUSINESS ADMINISTRATION
    PROFILE: GENERAL IN ACADAMIC

    Priya Viralkumar Patel


    Index number: 8437

    Supervisor

    Dr. Krzysztof Krassowski

    Jozefow 2018
    Contents
    INTRODUCTION ....................................................................................................................................... 3
    Rule of Law? ............................................................................................................................................ 4
    EFFECTS OF DEMONITISATION ON BLACK MONEY................................................................................. 5
    EVASION .................................................................................................................................................. 5
    EFFECTS OF DEMONETISATION ON AGRICULTURE................................................................................. 6
    Conclusion ............................................................................................................................................... 7
    REFERENCIES ........................................................................................................................................... 8
    INTRODUCTION

    On 8 November 2016, the Government of India announced the


    demonetisation of all Rs500 and Rs1000 banknotes of the Mahatma Gandhi
    Series. IT also announced the issuance of new Rs500 and Rs2000
    banknotes in exchange for the demonetised banknotes.

    The Government claimed that the action would curtail the shadow
    economy and reduce the use of illicit and counterfeit cash to fund illegal
    activity and terrorism. The announcement of demonetisation was followed
    by prolonged cash shortage in the weeks that followed, which created
    significant disruption throughout the economy. People seeking to
    exchange their banknotes had to stand in lengthy queues, and several
    deaths were to the rush to exchange cash.

    According to a 2018 report from the Reserve Bank of India approximately


    99.3% of the demonetised banknotes or Rs15.41 lakh crore that had been
    demonetised, were deposited with the banking system. The banknotes that
    were not deposited were only worth Rs 10,270 crore. leading analysts to
    state that effort had failed to remove black money from the economy. The
    BSE SENSEX and NIFTY 50 stock indices fell over 6 percent on the day after
    the announcement. The move reduced the country’s industrial production
    and its GDP growth rate.

    Initially, the move received support from several bankers as well as from
    some international commentators. The move was also criticised as poorly
    planned and unfair, and was met with protests, litigation, and strikes
    against the government in several places across India. Debates also took
    place concerning the move the house of parliament.1

    1
    "Withdrawal of Legal Tender Status for ₹ 500 and ₹ 1000 Notes: RBI Notice (Revised)".
    Reserve Bank of India. 8 November 2016. Retrieved 8 November 2016
    The government is expected to shift from efforts to improve the business
    climate to adoption of populist measures as the 2019 election approaches.
    India is developing into an open-market economy, but traces of its past
    autarkic policies remain. Economic liberalization measures that began in
    the early 1990s, including industrial deregulation, privatization of state-
    owned enterprises, and reduced controls on foreign trade and investment,
    have accelerated growth. Corruption, underdeveloped infrastructure, a
    restrictive and burdensome regulatory environment, and poor financial
    and budget management continue to undermine overall development.

    Therefore, India is a stable democracy. Its population is 80 percent Hindu,


    but it is also home to one of the world’s largest Muslim populations. Prime
    Minister Narendra Modi, leader of the Bharatiya Janata Party, took office in
    2014 and is credited with reinvigorating India’s foreign policy, in part to
    balance China’s growing influence in South Asia and the Indian Ocean. Modi
    promised sweeping economic reforms, but results thus far have been
    modest. The diverse economy encompasses traditional village farming,
    modern agriculture, handicrafts, and a wide range of modern industries.
    Capitalizing on its large, educated English-speaking population, India has
    become a major exporter of information technology services, business
    outsourcing services, and software workers.2

    Rule of Law?
    Real property rights are enforced in metropolitan areas, but titling remains
    unclear in some other urban and rural areas. Although the judiciary is
    independent, India’s courts are understaffed and lack the technology
    necessary to clear an enormous backlog. Corruption is an obstacle to
    growth and remains a serious problem, and there is little evidence to
    suggest that anticorruption laws are effective.

    2
    Saikia, Bijoy Sankar (18 November 2016). "Demonetisation may drag India behind
    China in GDP growth, rob fastest-growing economy tag". The Economic Times.
    Retrieved 5 January 2017
    EFFECTS OF DEMONITISATION ON BLACK MONEY

    The government estimate that Rs3 lakh, or approximately 99.3% of the


    demonetised banknotes However according to a 2018 report from the RBI
    approximately 15.41lakh crore that had been demonetised, were deposited
    with the banking system. The banknotes that were not deposited with the
    banking system. The banknotes that were not deposited were only worth
    Rs 10,720 crore. Commentators concluded that the government failed in its
    aim of purging black money from economy.

    EVASION

    There have been reports of people circumventing the restriction imposed


    on exchange transaction by conducting multiple transaction at different
    bank branches and also there have been reports of people circumventing
    the restrictions imposed on exchange transactions by conducting multiple
    transactions at different bank branches and also sending hired people,
    employees and followers in groups to exchange large amounts of
    demonetised banknotes at banks. In Gujarat, Delhi and many other major
    cities, sales of gold increased post-demonetisation, with an increased 20 to
    30% premium surging the price as much as ₹45,000 (US$630) from the
    ruling the cash deposited into hundis, or cash collection boxes in temples
    and gurudwaras are exempted from inquiry by the tax department which is
    sometimes misused to launder money.3

    3
    "The dire consequences of India's demonetisation initiative". The Economist. 3
    December 2016. Retrieved 5 January 2017
    EFFECTS OF DEMONETISATION ON AGRICULTURE

    Transactions in the agriculture sector are heavily dependent on cash and


    were adversely affected by the demonetisation. Due to scarcity of the new
    banknotes, many farmers have insufficient cash to purchase seeds,
    fertilisers and pesticides needed for the plantation of crops usually sown
    around mid-November. Farmers and their unions conducted protest rallies
    in Gujarat, Amritsar and Muzaffarnagar against the demonetisation as well
    as against restrictions imposed by the Reserve Bank of India on district
    cooperative central banks which were ordered not to accept or exchange
    the demonetised banknotes.
    The shortage of cash led to plunge in demand which in turn led to a crash in
    the prices of crops. Farmers were unable to recover even the costs of
    transportation from their fields to the market from the low prices offered.
    Some farmers dumped their produce in protest against the government.
    Demonetisation resulted in the relative erosion of agricultural wages and
    weak bargaining power of farmers for their produce.
    Real GDP growth rate
    Real GDP growth rate - Quarterly (%) [134][135][136][137]
    Real GDP growth rate - Year-on-Year (%) [138]
    Real GDP growth rate [134][135][136][137] (base year 2011-12)
    Financial Year Quarter Quarterly Yearly
    2015-16 Q1 (April–June) 7% 8% [138] Q2 (July–September)
    7.4%
    Q3 (October–December) 7.2%
    Q4 (January–March) 9.1%
    2016-17 Q1 (April–June) 7.9% 7.1% [138]
    Q2 (July–September) 7.5%
    Q3 (October–December) 7%
    Q4 (January–March) 6.1%
    2017-18 Q1 (April–June) 5.7% 6.5%
    Q2 (July–September) 6.3%
    Q3 (October–December) 7.2%
    Q4 (January–March) 7.6%
    2018-19 Q1 (April–June) 7.7%
    Q2 (July–September) 8.2%
    Q3 (October–December)
    Q4 (January–March)

    Global analysts cut their forecasts of India's real GDP growth rate for the financial year
    2016-17 by 0.5 to 3% due to demonetisation.[139][140] India's GDP in 2016 is
    estimated to be US$2.25 trillion, hence, each 1 per cent reduction in growth rate
    represents a shortfall of US$22.5 billion (₹ 1.54 lakh crore) for the Indian
    economy.[141] According to Society General, quarterly GDP growth rates would drop
    below 7% for an entire year at a stretch for the first time since June 2011.[142]

    The Q4'16-17 rate was 6.1% as against a forecast of 7.1% by economist. [143] The rate
    for the financial year 2016-17 was 7.1%, a reduction from the 8% in 2015-16[144]

    Conclusion
    Demonetization was the wrong policy yet all. The polls done show that
    more than 75% Indian people support the demonetization and these are
    the people who are actually suffering. These are the poor who are bearing
    the burden of it but they support it.
    I really do not wish to tolerate a Leader like Mr. Narendra Modi in
    future. because they have no planning, no idea about what are they going
    to do. He is the biggest liar in the country. let me start
    with Demonetization.
    As Manmohan Singh says: “It organized loot and legalized plunder.” I
    agree with him. Because they know something about economy.
    Demonetization in a booming economy is like shooting the tires of a
    speeding car. What was the purpose of demonetization. Even govt. do
    not know this.
    But all surveys suggest that only 6% of black money is held in cash. The rest is in real
    states, gold, jewelry, stocks and foreign accounts. Is it therefore worth
    demonetizing 86% of all currency to tackle 6% black money. How do you expect to
    have a major victory over black money by just dealing with that proportion? The
    justification of demonetization terms of elimination black money really fully.

    Fake currency: The fake currency or counterfeit currency in the economy


    is only 400 crore. This figure has been constant for four years. Is it
    appropriate to tackle four hundred crore worth of counterfeit currency
    by eliminating 86 % of all currency? Fake money had never been a big
    problem in India.

    REFERENCIES

    1. "Here is what PM Modi said about the new Rs 500, Rs 2000 notes and black

    money". India Today. 8 November 2016. Retrieved 9 November 2016.


    2. "Notes out of circulation". The Times of India. 8 November 2016.

    3. "Demonetization Announcement Anniversary 2017

    |Onmanorama". OnManorama. Retrieved 7 November 2017.


    4. Jump up to: "India demonetisation: Chaos as ATMs run dry". Al Jazeera. 9

    November 2016. Retrieved 9 November 2016.


    5. Jump up to: "Demonetisation: Chaos grows, queues get longer at banks, ATMs on

    weekend". Indian Express. 12 November 2016.


    6. "100 days of demonetisation: Stories of hardship". Al Jazeera.

    7. Jump up to: "India: Demonetisation takes its toll on the poor". Al Jazeera. 16

    November 2016. Retrieved 17 November 2016.


    8. "Demonetisation Death Toll Rises To 25 And It's Only Been 12

    Days". Huffingtonpost. Retrieved 15 November 2016.

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