PROJECT REPORT

ON
“STUDY OF IMPACT OF DEMONETIZATION IN INDIA”

Submitted to
LJ Institute of Management Studies
5 Year Integrated MBA (IMBA)

IN PARTIAL FULFILLMENT OF
THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF
BACHELORS OF BUSINESS ADMINISTRATION (BBA)
(Semester VI of INTEGRATED MASTERS OF BUSINESS
ADMINISTRATION – IMBA)

Under
Gujarat Technological University

UNDER THE GUIDANCE OF

FACULTY GUIDE - PROF. BHAVIK TANK

Submitted by
KRISHNAPALSINH INDRAJITSINH VIRPARA
Enrollment No.: 147290585054
IMBA – SEMESTER VI

Gujarat Technological University

Ahmedabad
April 2017
 CERTIFICATE

This is to certify that Krishnapalsinh Virpara has worked and completed his
project work for the semester VI IMBA Programme, on title “Study of Impact of
Demonetization in India” under my supervision. It is his own work and facts
reported by his personal findings and investigations.

Name & Signature of faculty guide Date of Submission

Prof. Bhavik Tank 10th April, 2017
__________________

Name & Signature of Professor in charge / Director of the Institute.

Stamp of the Institute with date.

 PREFACE

This project report on “the study of impact of demonetization in India” has

been prepared in partial fulfillment of the requirement for the Subject: Project
report of the Integrated MBA (Sem. VI) in the academic year 2016-2017. This
project is basically meant to acquire knowledge about the significance of cash
and cash transaction in the individual’s life as well as in the Indian economy.
The project report includes the study of procedure and implementation of
demonetization and changes and impacts in the economic constituents after
the implementation of demonetization. Preparing this project report was good
learning experience for me as I came to gain knowledge about remarkable
role of currency in a nation. I feel great pleasure in submitting this project
report and I hope that you will accept and appreciate my efforts.

3
 ACKNOWLEDGEMENT

I am glad to express my profound sentiments of gratitude to all who rendered

their valuable help for the successful completion of this project report titled,
“Study of Impact of Demonetization in India”

I record my deep sense of gratitude to, Prof. Viral Shah, Director – LJ IMBA,
Prof. Nikita Macquin, Dean LJ IMBA and Prof. Bhavik Tank, who gave me an
opportunity to work under their guidance which led me to the right direction for
the research.

I would also like to thank sincerely from the deep of my heart to all those
persons constantly guided me and gave me the practical knowledge and
materials of the subject.

My genuine sense of gratitude goes to my college and university that gave me

a chance to brighten my academic qualification that provided me this
opportunity to have practical knowledge on project report.

4
 DECLARATION

I, Krishnapalsinh Virpara, hereby declare that the report for the Project entitled
“Study of Impact of Demonetization in India” is a result of my own work and
my indebtedness to other work publications, references, if any, have been
duly acknowledged.

Place: Ahmedabad
Date: 10th April, 2017
Krishnapalsinh Virpara

5
 TABLE OF CONTENTS

CONTENTS PAGE NO.

PART 1 GENERAL INFORMATION 9

CHAPTER I Introduction 9
I.1 Demand of cash in India 11
I.2 Currency circulation in India 13
CHAPTER II Introduction to demonetization 14
II.1 Demonetization globally 16
CHAPTER III Demonetization in India 18

III.1 Indian history of demonetization 19

III.2 Purpose 20
III.3 Procedure 21
III.4 Controversies 23
III.5 Responses 25
CHAPTER IV Impacts of demonetization 31
IV.1 Financial sector 32
IV.1.1 Balance sheet of SCBs 32
IV.1.2 Profitablity of banks 34
IV.1.3 NBFCs 35
IV.1.4 Jan-dhan accounts 35
IV.2 Digital payment modes 37
IV.2.1 Digital banking 37
IV.2.2 E-wallets 40
IV.3 Demand of gold 41
IV.4 Human trafficking 42
IV.5 Hawala trading 43
IV.6 Railway bookings 44
IV.7 Transportation halts 45
IV.8 E-commerce 46
IV.9 Local tax payment 47
IV.10 Real estate 48
IV.11 Fake Currency
48
IV.12 PM Garib Kalyan Yojana 49
IV.13 Forecast of GDP of India 50
Part-2 PRIMARY STUDY 51
Chapter V Introduction of primary study 51
V.1 Literature review 52
V.2 Background of the study 58
V.3 Objectives of the study 59
Chapter VI Research Methodology 60
VI.1 Research 61
VI.2 Objectives of research 62
VI.3 Types of research 63
VI.4 Research methodology 67
VI.5 Market research 69
VI.6 Research process 72
VI.7 Research design 78
Chapter VII Data analysis and interpretation 81
Chapter VIII Results of the study 93
Chapter IX Limitations of the study 95

Chapter X Conclusion of the study 97

Annexure 99
References 101

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 LIST OF TABLES

Table No. Particulars Page No.

1 Bank notes in circulation 13

Changes in Major Assets and Liabilities of

2 32
SCBs

3 PMJDY: Number of Accounts 36

Growth in Select Electronic Modes of
4 38
Payments
5 Gold Imports 41

6 GDP Forecasting by various agencies 50

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 PART – 1
GENERAL INFORMATION

CHAPTER I
INTRODUCTION
A transaction that involves the immediate exchange of cash for a good,
service or any asset and the obligation is fulfilled by cash is called Cash
Transaction. Cash transaction refers to when customers pay using physical
currency, such as notes and coins.

A form of liquid funds given by a consumer to a provider of goods or services

as compensation for receiving those products. In most domestic business
transactions, a cash payment will typically be made in the currency of the
country where the transaction takes place, either in paper currency, in coins
or in an appropriate combination

Cash transactions can be the most difficult to account for and record, and the
most necessary. Maintaining control and accountability of cash transactions
is a huge responsibility for a company, and the company's accounting
department. Of all the transactions that take place, cash transactions are the
hardest to record and track, simply because the paper trail generated by a
purely cash transaction is virtually non-existent.

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I.1 DEMAND OF CASH BY VARIOUS AGENTS IN THE INDIAN ECONOMY:

India has traditionally been a cash intensive economy. According to an

estimate, about 78 per cent of all consumer payments in India are effected in
cash
Cash usage and demand is classified on the basis of the activity done for
cash, type of medium of exchange of cash, type of value of cash storage.

1. Unaccounted Transactions:
 These are the transactions of the business and monetary
activities that are legitimate in nature by law but taxes are not
paid on the profits earned by unaccounted transactions that
make it illegal.
 Incomes are earned through exchange for these transactions in
cash by making payments in cash.
 Cash is stored in the value of cash itself until the alternative
investment options become available such as real estate sector,
jewellery or in the instruments which yield more returns than
cash.

2. Illegal transactions:
 These transactions are the referred as the payments for crime,
corruption, bribe, human trafficking or other unlawful activities.
 Cash is stored in the value of cash itself until the alternative
investment options become available such as real estate sector,
jewellery or in the instruments which yield more returns than
cash.

3. Informal Sector transactions:

 Informal sector referred as a sector that includes all the jobs
which are not recognized as normal income sources, and on
which taxes are not paid.

11
  Income earned by exchange of cash is neither taxed nor
monitored by government as its contribution to the economy is
negligible.

4. Accounted transactions:
 These transactions are the business proceedings that has a
monetary impact on an firm's financial statements, and is
recorded as an entry in its accounting records and are legal.
 Medium of exchange is cash for these transactions which
demand for money
 Store of value of cash could be savings in cash form, in bank, or
invested in an option which gives better returns.

In the context of the three main sectors of Indian Economy.

1. Agriculture sector includes the cultivation and allied sectors like

forestry, animal husbandry, fishing and horticulture
2. The Industrial (or manufacturing) sector is classified into micro, small,
medium and large categories.
3. Services sector includes banking, warehousing, transportation,
advertising, communication, and information technology (IT) services,
etc.

Here, the fact that is worth noting is that even though the agricultural sector
contributes least to the overall GDP of the nation, its tends as the highest
employed human workforce with around 60% of the total working population
of the country engaged in it. Most of the transactions in these sectors are
dependent on cash as majority.

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I.2 CURRENCY IN CIRCULATION IN INDIA:
In India, the Reserve Bank has the sole authority to issue banknotes in India.
Reserve Bank, like other central banks the world over, changes the design of
banknotes from time to time. The Reserve Bank has introduced banknotes in
the Mahatma Gandhi Series since 1996 and has so far issued notes in the
denominations of ₹5, ₹10, ₹20, ₹50, ₹100, ₹500 and ₹1000 in this series.

The annual report of Reserve Bank of India (RBI) of 31 March 2016 stated
that total bank currency notes in circulation valued to ₹16.42 lakh crore
(US$240 billion) of which nearly 86% (around ₹14.18 lakh crore (US$210
billion)) was ₹500 and ₹1000 currency notes.

Table.1 Banknotes in circulation

Denomination Volume Value
(₹) (million pieces) (₹ billion)

March 2016 March 2016

2 and 5 11,626 45
(12.9) (0.3)

10 32,015 320
(35.5) (1.9)

20 4,924 98
(5.4) (0.6)

50 3,890 194
(4.3) (1.2)

100 15,778 1,578

(17.5) (9.6)

500 15,707 7,854

(17.4) (47.8)

1000 6,326 6,326

(7.0) (38.6)

Total 90,266 16,415

Note: Figures in parentheses represent the percentage share in total.

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 CHAPTER II
INTRODUCTION TO DEMONETIZATION

14
II DEMONETIZATION:

Coins and Banknotes may cease to be “legal tender” if new notes of the same
currency replace them or if a new currency is introduced replacing the former
one.

Legal tender is a medium of payment recognized by a legal system to be valid

for meeting a financial obligation. Paper currency and coins are common
forms of legal tender in many countries.
Coins and banknotes are usually defined as legal tender.

There are various reasons why nations demonetize their local units of
currency:

1. To combat inflation.
2. To combat corruption and crime (counterfeiting, tax evasion).
3. To discourage a cash-dependent economy.
4. To facilitate trade.

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II.1 DEMONETIZATION GLOBALLY

II.1.1 REPUBLIC OF IRELAND:

According to the Economic and Monetary Union Act, 1998 of the Republic of
Ireland which replaced the legal tender provisions that had been re-enacted in
Irish legislation from previous British enactments, "No person, other than the
Central Bank of Ireland and such persons as may be designated by the
Minister by order, shall be obliged to accept more than 50 coins denominated
in euro or in cent in any single transaction."

II.1.2 GHANA:
In 1982, Ghana rolled out the decision to demonetize their 50 cedi currency
notes in order to monitor money laundering and corruption. The change was
not welcomed warmly, creating chaos across the country and finally resulted
in a move back to physical assets and foreign currency.

II.1.3 NIGERIA:
In 1984, The Military government of Nigeria announced demonetization and
introduced different coloured notes to invalidate their old currency to fight
against black money

II.1.4 SOVIET UNION:

In 1991, under the governance of Mikhail Gorbachev, the then Soviet Union
demonetized the higher denominations of ruble bills, the 50s and 100s. The
move did not go well and resulted in takeover of Mikhail’s leadership within
eight months of the plan.

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II.1.5 NORTH KOREA:
In 2010, the regime of then-dictator Kim Jong-II mounted a reform that
knocked off two zeros from the face value of the old currency in an effort to
tighten control of the economy and close black markets. Combined with a
poor harvest, the measure left the country with severe food shortages,
according to reports at the time.

II.1.6 MYANMAR:
In 1987, the country's military junta invalidated as much as 80 percent of the
value of money in circulation. This step was taken to curb the black market.
Sadly, this decision led to economic disruption and it also lead to mass
protests that killed many people.

II.1.7 ZIMBABWE:
In June 2015, the Reserve Bank of Zimbabwe said it would begin a process to
demonetize. The plan was to have completed the switch to the US dollar by
the end of September 2015. In December 2015 Patrick Chinamasa the
Zimbabwe Minister of Finance said they would make the Chinese Yuan their
main reserve currency and legal tender after China cancelled $40 million
debts. However, the Reserve Bank of Zimbabwe denied this in January 2016.
In June 2016, nine currencies were legal tender in Zimbabwe but it was
estimated 90% of transactions were in US dollars and 5% in Rand. Use the
"Insert Citation" button to add citations to this document.

17
 CHAPTER III
DEMONETIZATION IN INDIA

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III. ABSTRACT:

On the evening of 8 November 2016, at 8:15 pm, Prime Minister of India, Shri
Narendra Modi addressed the nation on live telecast and declared
demonetization, the circulation of ₹500 and ₹1,000 banknotes of the Mahatma
Gandhi Series as invalid effective i.e. would no longer be considered as a
legal tender and announced the issue of new ₹500 and ₹2,000 banknotes of
new series of the Mahatma Gandhi notes.

However, Government Hospitals, Petrol, CNG and gas stations, Railways and
Airlines ticket booking counters, State-government recognized milk dairies
and ration stores, and Crematoriums were allowed to accept the banned ₹500
and ₹1,000 bank notes until 2nd December, 2016.

III.1 HISTORICAL FACTS ABOUT DEMONETIZATION IN INDIA

Although the history of demonetization in India dates back to the time when
various rulers ruled this country, the instances of demonetization in India are:
1. On 12th January 1946, ₹500, ₹1,000 and ₹10,000 notes were declared
invalid as legal tender.
2. New notes of ₹1000, ₹5000 and ₹10,000 came into economy in 1954.
3. On 16th January 1978, the Morarji Desai led-Janata Party demonetized
banknotes of ₹1000, ₹5000 and ₹10000.
4. RBI introduced a new banknote of ₹500 into the economy in 1987 to
contain inflation.
5. On 8th November 2016, the old banknotes of ₹500 and ₹1,000 were barred
from being legal tender and new notes of ₹500 ₹2000 were soon introduced.
Also, Denominations of 1, 2, 3, 5, 10, 20 & 25 paise were in circulation till
June 30, 2011 but were then withdrawn. 50 paise coins are still in circulation
and are called small coins. Other denominations called as rupee coins.

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III.2 PURPOSE OF DEMONETIZATION:

After the PM Modi’s announcement of demonetization, Urjit Patel the

Governor of the Reserve Bank of India and Shaktikanta Das the Economic
Affairs Secretary held a press conference and explained the purpose of
demonetizing the ₹500 and ₹1,000 banknotes was as follows:

 To tackle the problem of Black Money in India.

 To stop terror financing.
 To get india free from corruption
 To make the corrupt lose their money.
 To get everyone to have bank account.
 To mainline the parallel economy to formal economy.
 Encourage deposit base and Savings
 For cashless society
 For cracking down the fake currency notes (counterfeit notes)
 To give boost to white economy.

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III.3 PROCEDURE OF DEMONETIZATION:
The Reserve Bank of India set forth a period of 50 days until December 30
2016 to deposit the demonetized notes as a credit in their respective bank
accounts.

III.3.1 EXCHANGE OF DEMONETIZED NOTES

Citizens were given provision to exchange the demonetized ₹500 and ₹1,000
banknotes with the new ₹500 and ₹2,000 banknotes over the cash counter of
banks and their branches upto a limit which assorted over the period of time
of 50 days.
 Initially, from 8th to 13th November, the exchange limit was fixed at
4000 Rupees per day per person.
 From 14th to 17th November, the exchange limit increased upto 4500
Rupees per day per person.
 After 17th November, the exchange limit was reduced to 2000 Rupees
per day per person.
 From 25th November, all exchange of demonetized notes was suddenly
stopped.

III.3.2 CASH WITHDRAWAL FROM BANKS AND ATMs

 From 10th to 13th November, withdrawals of cash from bank accounts
was limited and restricted to 10,000 Rupees per day per account &
20,000 Rupees per week per account.
 Later on per week cash withdrawal limits were increased to 24,000
Rupees from 14th November, 2016.
 Cash withdrawal limit from Automated Teller Machine (ATM) was also
inflicted to 2,000 Rupees per day per Debit / Credit card till 14th
November and it was increased to 2,500 Rupees per day per Debit /
Credit card till 31st December, 2016.
 From 1st January, 2017 the cash withdrawal limit was increased to
4,500 Rupees per day and from 16th January it was again raised to
10,000 Rupees per day per card.

21
  The RBI’s notification circular about Cash withdrawal limit was varied
on the basis of type of bank account i.e. Current accounts / Cash
Credit accounts / Overdraft accounts.

 Inspite of the different notifications & guidelines from the Reserve

Bank,
Different banks and their branches were having their own operating
limits and cash withdrawal limits. Banks were providing cash to the
customers as per the availability of new currency of ₹500 and ₹2,000
banknotes.

However, under the revised guidelines of the Reserve Bank of India issued on
17th November 2016, Families were allowed to withdrawal upto 2,50,000
Rupees for wedding expenses from one account the money can be withdrawn
only from the credit balance shown in the account on the day when
demonetization of high denomination notes was declared. The guidelines
states that the cash to be withdrawn for wedding purpose should be used only
to make payments to those persons who do not have bank accounts and the
names and other details of such recipients should be mentioned while
applying for withdrawal of the cash. It was mandatory that the application for
withdrawal should also provide names of bride and groom along with their
identify proofs, addresses and venue & date of marriage. Withdrawals can
only be made by either the person who is getting married or their parents. The
amount can be withdrawn only if the date of marriage is on or before 30th
December 2016.

RBI issued other guidelines which states that rules were also changed for
farmers who are permitted to withdraw 25,000 Rupees per week from their
accounts against crop loans.
However, Banks were dispensing notes as per their convenience and
availability of cash with them.

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III.4 CONTROVERSIES OVER DEMONETIZATION

III.4.1 LEAKAGE OF INFORMATION IN ADVANCE:

 Before 15 days of the official announcement of demonetization, A Hindi

newspaper named ‘Dainik Jagran’ reported a news that the Reserve
Bank of India is going to release new currency notes of ₹2,000 and
going to withdraw existing ₹500 & ₹1,000 banknotes.
 On 21st October, 2016 ‘The Hindu’ Business Line newspaper also
mentions coming of ₹2,000 note and mention about the possibility of
withdrawal of old high denominations ₹500 & ₹1,000 notes.
 In April, 2016 Arundhati Bhattacharya the chairman of the State Bank
of India had also openly spoken about the possibility of demonetization
of ₹500 & ₹1,000 banknotes.
 On 1st April 2016 i.e. before 7 months of the announcement of
demonetization a Gujarati newspaper, ‘Gujarat Samachar’ published
an article that “announced” demonetization of ₹500 & ₹1,000
banknotes. The editor of the newspaper then affirmed that it was only
April fool’s day prank. Coincidently, the same article contained many of
the facts that were matching with the actual facts of announcement of
demonetization in November including the issuance of new currency
notes of ₹2,000.

23
III.4.2 ACCUSATIONS AND ALLEGATIONS:

 The Communist Party of India (Marxist) (CPI-M) alleged that Bhartiya

Janta Party’s (BJP) West Bengal constituency had the advance
knowledge about the demonetization and deposited and settled their
high denominations before the announcement of demonetization.
 Arvind Kejriwal, leader of Aam Aadmi Party also claimed that there had
been any pre leakage of information regarding the announcement of
demonetization. He suspected that how a BJP leader Sanjeev Kamboj
posted about new currency notes of ₹2,000 on social media just a day
before the official declaration of the move and he also alleged that the
sudden rise in the bank deposits between July and September 2016
was the result of leakage of information about demonetization.
 Nitish Kumar (Chief Minister of Bihar), Rahul Gandhi (Leader of
Congress party) and Arvind Kejriwal alleged that the BJP made large
purchases of land in Bihar before the demonetization as they were
having prior information about it.

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III.5 RESPONSES AFTER THE ANNOUNCEMENT
The initial reactions over the demonetization were both, in favor of the move
and also against of the move.

III.5.1 SUPPORT OF DEMONETIZATION:

 The President of the Union of India, Shri Pranab Mukherjee supported

the demonetization and welcomed the bold step of the Government of
India which will help unearth unaccounted money & counterfeit
currency said in a statement from Rashtrapati Bhavan.
 Bankers like Arundhati Bhattacharya (Chairperson of State Bank of
India) & Chanda Kochhar (MD & CEO of ICICI Bank) appreciated the
demonetization move in the sense that it will help in curbing black
money.
 Businessmen Anand Mahindra (Mahindra Group), Sajjan Jindal (JSW
Group), Kunal Bahl (Snapdeal and FreeCharge) also supported the
move adding that it would also accelerate e-commerce.
 Infosys founder N. R. Narayana Murthy praised the move.
 Finance Minister Arun Jaitley said that demonetization would be
cleaning up the whole economic system with the increase in the size of
economy and the base of revenue. He mentioned the demonetization
along with the upcoming Goods and Services Tax (GST) as "an
attempt to change the spending habit and lifestyle of the citizens”.
 The Indian National Congress spokesperson Randeep Surjewala
welcomed the move but remained doubtful on the after effect &
consequences that would follow.
 The demonetisation also got support from Chief Minister of Andhra
Pradesh Nara Chandrababu Naidu & Chief Minister of Bihar Nitish
Kumar.
 Former Chief Election Commissioner of India S. Y. Quraishi said with
the hopes that demonetization could lead to long term electoral reforms
as most of the unaccounted money is used in elections.

25
  Social activist Anna Hazare hailed demonetization as a revolutionary
step by the Modi Government.

On the whole of this, International agencies and media houses response

towards the move was positive by considering it as the bold crackdown on
corruption in the country.
 International Monetary Fund (IMF) issued a statement supporting the
Indian PM Modi's great efforts to fight against corruption by the
announcing demonetization policy.
 Former Prime Minister of Finland & Vice-President of European
Commission Jyrki Katainen appreciated the demonetization move
stressing that efforts bringing transparency will strengthen the Indian
economy.
 Chinese state media Global Times praised Indian government’s move
and termed it as “fierce fight against black money and corruption.”
 Forbes has published an article titled “India’s Great Bank Note Switch
Appears To Be Working – $30 Billion in Rupees deposited in Banks.”
The article notes that a move of this magnitude would result in “obvious
chaos”, but points that “so far at least it looks as if it is working.” The
article goes on to call the move as “rather well done, a clever plan.”

 The Independent, a Singapore-based paper published a glowing article

on the move titled “Modi does a Lee Kuan Yew to stamp out corruption
in India.” Lee Kuan Yew was the Singaporean Prime Minister for
several decades and is considered the architect of modern Singapore.
“Government leaders feel that the sudden move by the Indian Prime
Minister has brought new respect for him. A senior Indian government
official even equated Mr Modi to Singapore’s first Prime Minister Lee
Kuan Yew. From making up his mind to rolling it out yesterday (8 Nov),
a new Lee Kuan Yew is born in India. It will be reflected in the legacy of
this Prime Minister,” the article said.

26
III.5.2 CRITISM OF DEMONETIZATION:

 Amartya Sen, Nobel laureate Indian economist, severely criticized the

demonetization move calling it a “despotic action” among other things.
 Kaushik Basu, Former Senior Vice-President and Chief Economist of
the World Bank, called it a “major mistake” and said that the 'damage'
is likely to be much greater than any possible benefits.
 Pronab Sen, former Chief Statistician and Planning Commission of
India member, called it a “hollow move” since it did not really address
any of the purported goals of tackling black money or fake currency.
 Prabhat Patnaik, a former professor of economics at the Jawaharlal
Nehru University, Delhi called the move 'witless' and 'anti-people'. He
criticized the simple way in which black money was assumed as “a
hoard of cash”, saying that it would have little effect in eliminating
“black activities” while “causing much hardship to common people.”
 Noted economist and journalist, T. N. Ninan wrote in the Business
Standard that demonetization “looks like a bad idea, badly executed on
the basis of some half-baked notions”.
 Industrialist Rajiv Bajaj (Managing Director of Bajaj Auto) criticized the
demonetization, saying that not just the execution, but the concept of
demonetization was wrong in itself.
 M Seeni Ahamed, General Secretary of the Indian National League, to
scrap the decision, filed a Public Interest Litigation (PIL) in Madras
High Court. The High Court dismissed the PIL stating that it could not
interfere in monetary policies of the government.
 Similar PILs were also filed in the Supreme Court of India. Supreme
Court of India is yet to decide on the matter.

27
III.5.3 POLITICAL OPPOSITION PARTIES RESPONSE:

 On 16th November 2016, Banerjee led a rainbow delegation comprising

political parties of Trinamool Congress, Aam Aadmi Party, BJP ally
Shiv Sena and National Conference to Rashtrapati Bhawan to protest
against the decision to withdraw the ₹500 & ₹1,000 banknotes. A
memorandum was submitted to the President of India Pranab
Mukherjee demanding rollback of the decision.
 A Congress-led opposition, which includes 13 political parties, opposed
the central government on the demonetization issue in the Winter
Session of the Indian Parliament on 16th November 2016. The debate
on demonetization was initiated by Indian National Congress and
Anand Sharma in the Rajya Sabha on 16 th November 2016.
In the demonetization debate on the first day of the winter session of
Parliament at the Rajya Sabha, Pramod Tiwari from the Indian National
Congress compared Narendra Modi to Benito Mussolini, Adolf Hitler
and Muammar Gaddafi.
Prem Chand Gupta, a member of the Rashtriya Janta Dal, questioned
a statement of Modi from the unscheduled TV broadcast on 8
November, "If it was planned 10 months ago, how did RBI Governor
Urjit Patel sign on new note?"
Praful Patel, a member of the Nationalist Congress Party, stated “the
government was not even prepared to recalibrate the ATMs while
announcing the move. People's suffering are unimaginable. Nobody is
questioning the government's intention, but you are unprepared to
execute the move”.
The former Chief Minister of Uttar Pradesh Mayawati Prabhu Das
considered the situation as “a financial emergency”, by saying “It looks
as if Bharat (India) has shut down”.
Sitaram Yechury leader of Communist Party of India questioned the
government on the demonetization move by stating “only 6% of black
money in India is in cash to drive his point that demonetization won't
curb illicit wealth”.

28
 On 17th November 2016, the Chief Minister of Delhi, Arvind Kejriwal
with the Chief Minister of West Bengal, Mamata Banerjee led a rally at
Azadpur Mandi, Delhi against demonetization of ₹500 & ₹1,000
banknotes, where Arvind Kejriwal demanded the withdrawal of
demonetization in 3 days & Mamata Banerjee also stated “I give the
government 3 day ultimatum, fix things or withdraw the demonetization
scheme”.
 On the second and third day of the Winter Session of Parliament, on
17th and 18th November 2016, in the debate over demonetization issue
the opposition and the government clashed, bringing both the houses
to continuous halts.
 On 24th November 2016, the former prime minister of India Manmohan
Singh said, in the demonetization debate, "this scheme will hurt small
industries, t and farming sector. The GDP can decline by about 3% due
to this move", while he also questioned the Prime Minister Modi for
examples of countries where people have deposited their money in the
banks and are not allowed to withdraw their own money. and later also
said that it is not good that on each day RBI brings out new
notifications. It doesn't reflect properly on Prime Minister's Office,
Finance Minister and the Reserve Bank of India. Cooperative banking
system has been prevented from handling cash. And at last he termed
the demonetization move as an “organized loot, legalized plunder of
the common people"

29
III.5.4 STRIKES OPPOSING DEMONETIZATION:

 The demonetization was antipathetic and opposed by opposition

parties in the both houses of the parliament; it provoked organized
nationwide strikes across India.
 Opposition parties like Indian National Congress, Bahujan Samaj Party
(BSP), Trinamool Congress, DMK, Janta Dal United (JDU), AIADMK,
Nationalist Congress Party (NCP), Communist Party of India (Marxist)
(CPI-M), Rashtriya Janata Dal (RJD) and the Samajwadi Party decided
to perceive ‘Akrosh Diwas’ as, a protest campaign day on November
28th 2016, and launched protests in front of banks, demanding that
money deposited in the bank be returned to people with the withdrawal
of the demonetization of ₹500 & ₹1,000 banknotes.
In Bihar, 15 trains were blocked and stranded, while the states of West
Bengal, Maharashtra and Uttar Pradesh saw protest marches and
rallies led by opposition parties.
In Kerala, shops and business establishments were shut, with school
and colleges closed throughout the state, while movements of private
vehicles were also disrupted in Northern Kerala.

 The Indian National Congress spokesperson Randeep Surjewala on

31st December 2016 i.e. on the 50th day since demonetization
announced said, “The Congress party has decided to launch a
nationwide movement to expose the "biggest scam" of independent
India.”

30
 CHAPTER IV
IMPACTS OF DEMONETIZATION

31
IV.1 FINANCIAL SECTOR:
This sector shows out the impact of demonetization on banks; liquidity
conditions and transmission of monetary policy; non-banking financial
intermediaries; and, Jan-Dhan accounts.

IV.1.1 EFFECTS ON BALANCE SHEET OF SCHEDULED COMMERCIAL

BANKS:

The demonetization move has had a significant impact on the balance sheet
of scheduled commercial banks (SCBs), both in terms of size and
composition.
After the announcement of demonetization, within the 4 days, the old ₹500 &
₹1,000 banknotes worth ₹3 trillion (US$45 billion) were deposited in the banks
and about ₹500 billion (US$7.4 billion) supplied out as withdrawals from the
bank accounts.
During these 4 days after demonetization, Indian banking system handled
about 18 crores (180 million) transactions.
Decline in currency in circulation because of the demonetization escorted to a
huge rise and surge in the bank deposits. The demonetized notes were
accepted at bank counters till December 30, 2016.
Between October 28, 2016 and January 6, 2017 (i.e., days immediately prior
to and after demonetization for which fortnightly banking system data are
available), total currency in circulation declined by about ₹ 8,800 billion.
Remonetisation has been progressing at a fast pace. (Remonetizing is the
process of restoring to the status of legal tender).
Between end-December 2016 and early March 2017, there was a net
increase in currency in circulation by about ₹ 2,600 billion. During the same
period, there was also found a decrease in deposits with banks moderately.

Banks states data on their major assets and liabilities on a fortnightly basis.
As per data available for the reporting Fridays of October 28, 2016 (prior to

32
demonetization) and February 17, 2017 (latest available), aggregate deposits
of SCBs increased by ₹ 5,549 billion during the period.

Table 2: Changes in Major Assets and Liabilities of SCBs –

October 28, 2016 and February 17, 2017
(₹ billion)
Liabilities Assets
1. Aggregate Deposits 5,549 1. Bank Credit 1,008
2. Borrowings (-56) 2. Investment in 4,560
Government Securities
3. Net Other Assets (-75)
Total 5,493 Total 5,493
Note: Data are provisional.
Source: RBI

33
IV.1.2 PROFITABILITY OF BANKS:

Banks’ net profits essentially reflect the difference between interest earned on
loans and advances and investments, and interest paid on deposits and
borrowings, adjusted for operating costs and provisions.
Loans and advances and investments, which are the main sources of interest
income, together constitute more than 85 per cent (61 per cent accounted for
by loans and advances and 25 per cent by investments) of banks’
consolidated balance sheet.
After the demonetization, there has been a surge in the CASA deposits of
banks. CASA is abbreviation of Current Account Savings Account. It is the
ratio that indicates how much of the total deposits with the bank are in the
current account and savings account.
The biggest beneficiary from the demonetization policy is the banking sector.
This is mainly due to the queues of people depositing cash in the banks –
which will result in substantial liquidity with the banks. As the deposits with the
banks will increase so will increase the CASA, which will increase the Net
Interest Income and the Net earnings of the banks.
This way the banks get funds at no or very low cost (interest). Banks do not
pay interest on the current account deposits and pays a very low % of interest
on savings account deposits. Hence, it is a good measure to get deposits at
no or very low cost.
As the banks get a lot of liquidity in their hands, they are expected to enhance
the borrowing cycle by lending the money at a lower rate of interest. Hence,
the interest rates on borrowing money are expected to be lower down.

34
IV.1.3 NON-BANKING FINANCIAL INTERMEDIARIES:
Demonetization has impacted various financial intermediaries differently. As
explained earlier, consolidated balance sheet of SCBs has expanded by
about ₹6.7 trillion in the post-demonetization period.
Debt oriented mutual funds and insurance companies have also gained.
Non-banking Financial Companies (NBFCs) and Micro Finance Institutions
(MFIs) were adversely affected, both in terms of disbursals and collection of
dues. However, the situation with regard to most NBFCs has started to
improve from late December 2016.

IV.1.4 PRADHAN MANTRI JAN-DHAN YOJANA ACCOUNTS:

Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission for Financial
Inclusion to ensure access to financial services, namely, Banking/ Savings &
Deposit Accounts, Remittance, Credit, Insurance, Pension in an affordable
manner. Account can be opened in any bank branch or Business
Correspondent (Bank Mitra) outlet.
After demonetization, 23.3 million new accounts were opened under the
Pradhan Mantri Jan-Dhan Yojana (PMJDY), proportion of which 80% were
with public sector banks. 53.6% of the new Jan Dhan accounts opened, were
in urban areas and 46.4% in rural areas.
The amount of deposits under PMJDY accounts increased significantly post
demonetization. On 9th November, 2016 the total balance in PMJDY accounts
was ₹456 billion which peaked at ₹ 746 billion as on December 7, 2016 i.e. an
increase of 63.6% in the total balance of accounts in almost less than a
month.
Moreover, there were reports regarding the use of these accounts to convert
black money i.e., unaccounted money or illegal money into white, the
government and authorities have issued warrant against such accounts which
were misused. In order to check the misuse of Jan Dhan accounts by black
money hoarders following the demonetization, the Reserve Bank of India has
restricted the withdrawal from such accounts to ₹10,000 per month. However,
Branch managers were allowed further withdrawals beyond ₹10,000 a month

35
within the current applicable limits only after ascertaining the genuineness of
such withdrawals and duly documenting the same on bank's record.

Table 3 : PMJDY: Number of Accounts

(in million)
Bank Group As on November 9, As on March 1, 2017 Variation (01-03-2017
2016 over 09-11-2016)
Rural Urban Total Rural Urban Total Rural Urban Total

Public Sector
114.3 89.3 203.6 122.1 100.8 222.9 7.8 11.5 19.3
Banks

(6.8) (12.9) (9.5)

Regional Rural
Banks 37.1 6.0 43.1 40.0 6.4 46.4 2.9 0.4 3.3

(7.8) (6.8) (7.7)

Private Sector
5.3 3.1 8.4 5.4 3.6 9.0 0.1 0.5 0.6
Banks

(1.3) (16.8) (7.0)

Scheduled
156.7 98.4 255.1 167.5 110.9 278.4 10.8 12.5 23.3
Commercial Banks

(6.9) (12.7) (9.1)

Note: Figures in parentheses are percentage variations.

Source: Pradhan Mantri Jan Dhan Yojana website.

36
IV.2 DIGITAL MODES OF PAYMENT:
An aftereffect of demonetization was that the digital modes of payments
picked up sharply. After demonetization, there has been a significant
emphasis on digital modes of payment.

IV.2.1 DIGITAL AND CASHLESS BANKING FACILITY:

The Government of India and the Reserve Bank of India have initiated a
series of measures, some of which are temporary, to promote movement from
cash to non-cash modes of transactions which are as follows;
(i) Reduction in the merchant discount rate (MDR) and point of sale
(POS) fees;
(ii) Monetary incentives in the form of discounts and prizes;
(iii) Service tax relief on MDR for small transactions;
(iv) Waiver of charges for small value transactions under Immediate
Payment Service (IMPS), Unified Payment Interface (UPI) and
Unstructured Supplementary Service Data (USSD) based *99#
platform;
(v) Broadening Prepaid Payment Instrument (PPI) reach by
enhancement of limits;
(vi) Introduction of a new category of PPIs;
(vii) Permitting banks to issue PPIs to a larger set of entities; and
(viii) Permitting National Payments Corporation of India (NPCI) to launch
(a) the common app for UPI; and
(b) National Electronic Toll Collection (NETC) system.
The government also announced that it would ensure that transactions
fee/MDR charges associated with payment through digital means shall not be
passed on to consumers. These measures are encouraging migration of
consumers from cash to digital modes of payments.
After the announcement of demonetization, digital activity levels were low in
the initial weeks as people were busy depositing/exchanging SBNs. However,
in December 2016, digital payment activity increased alongside progressive
remonetization. The usage statistics show that growth for major modes of
electronic payments was good in October 2016, mainly on account of festive

37
season. The continuance of that high growth with a further pick up in some
components from November to January 2017 (Table 4) was a positive fallout
of demonetization. However, the pace of growth moderated somewhat in
February 2017.

Table 4 : Growth in Select Electronic Modes of Payments

(y-o-y growth in percentage)
Category Oct-16 Nov-16 Dec-16 Jan-17 Feb-17
NEFT Volume 16.2 23.3 39.0 38.0 34.5
Value 37.6 38.3 40.8 60.2 49.5
CTS Volume -1.1 23.0 58.4 52.7 20.2
Value 2.9 8.6 13.0 19.3 0.8
IMPS Volume 116.7 89.6 157.2 177.7 150.4
Value 150.7 135.9 186.6 196.7 184.2
NACH Volume 53.0 30.8 58.3 19.8 -0.9
Value 89.8 76.3 116.7 22.8 54.2
Source: RBI Bulletins and Press Releases on Electronic Payment Systems - Representative Data

Glossary:
1. National electronic funds transfer (NEFT) is a nation-wide payment
system facilitating one-to-one funds transfer. Under this Scheme,
individuals, firms and corporates can electronically transfer funds from
any bank branch to any individual, firm or corporate having an account
with any other bank branch in the country participating in the Scheme.
Under NEFT, the transactions are processed and settled in batches.
There is no limit – either minimum or maximum – on the amount of
funds that could be transferred using NEFT.
2. Immediate Payment Service (IMPS) offers an instant, 24X7, interbank
electronic fund transfer service through mobile phones. IMPS transfers
money instantly within banks across India through mobile, internet and
ATMs.
3. Cheque Truncation System (CTS) is the process that obviates the
need to move the physical instruments across bank branches. This
reduces the time required for their collection and brings elegance to the
entire activity of cheque processing.
4. National Automated Clearing House (NACH) implemented by NPCI
is a web based solution for making bulk transactions towards

38
 distribution of subsidies, dividends, interest, salary, pension etc. and
also for bulk transactions towards collection of payments pertaining to
telephone, electricity, water, loans, investments in mutual funds,
insurance premium etc.
5. Unified Payments Interface (UPI) is a system that, through a
universal application for transaction, connects multiple bank accounts
into a single mobile application (of any participating bank) for
immediate money transfer through mobile device round the clock 24x7
and 365 days. It uses a single mobile application for accessing different
bank accounts. Recently NPCI has launched a front-end app called
BHIM that can be downloaded on mobiles to use UPI for fund transfer.
6. Unstructured Supplementary Service Data (USSD) service of NPCI
caters to the need for immediate low value remittances. The USSD
service brings together diverse ecosystem partners such as banks &
telecom service providers and allows customers to access financial
services by dialing *99# from their mobile registered with the bank. The
service works across all GSM service providers all types of handsets –
smart phones and feature phones.

39
IV.2.2 ELECTRONIC WALLETS:
Electronic wallets also known as Mobile wallets and their companies have
turned out to be the largest beneficiary of India’s biggest ever cash shortage
due to demonetization which overnight sucked out 86% of the country’s
currency in circulation.
Paytm a mobile wallet App was facing their traffic increased by 435%, app
downloads grew 200%, and there was 250% rise in overall transactions and
transaction value after demonetization. The company’s founder and CEO
Vijay Shekhar Sharma said in media that he is living a dream. While Paytm’s
rise is a success story in itself, it also underlines the growth of cashless
transactions in the country.
Other mobile wallet companies like MobiKwik and Snapdeal-owned
Freecharge also witnessed sudden upward growth. State Bank of India’s SBI
Buddy wallet became the fourth largest mobile wallet in the country.
Bipin Preet Singh, founder and CEO of MobiKwik said, “There might be few
POS machines, but most of the people nowadays have smartphones, which
have become the new medium of payment”.

40
IV.3 IMPACT ON DEMAND OF GOLD:

After demonetization, there was a sudden spike in domestic demand for gold
(or gold items), with buyers reportedly willing to pay huge premiums to
dispose of old currency notes with jewelers. Reflecting this development as
well as the seasonal jump, the volume of gold imports surged in November,
even above the elevated October level. Gold imports, however, declined
sharply in December 2016 and January 2017 (Table 20). As around 80 per
cent of the gems and jewellery purchases in India are made in cash,
consumer demand was reported to have been impacted due to the cash
shortage.
Several domestic factors impacted demand for gold such as weak rural
demand, destocking of earlier purchases, recycling of jewellery of households,
increased regulations towards transparency and the possibility of some
demand being partly met through smuggling.15 Besides, high and volatile
international gold prices also appeared to have impacted gold demand.

Table 5 : Gold Imports

Value Volume Value Volume
Month
(US$ Billion) (Tonnes) (US$ Billion) (Tonnes)
2015-16 2016-17
April 3.1 86.8 1.2 31.0
May 2.4 69.2 1.5 46.6
June 2.0 56.6 1.2 39.5
July 3.0 89.4 1.1 26.5
August 5.0 152.9 1.1 25.7
September 2.0 64.2 1.8 50.5
October 1.7 48.7 3.5 99.7
November 3.5 110 4.4 119.2
December 3.8 121.8 1.9 54.1
January 2.9 93.3 2 53.2*
February 1.4 48.3
March 1 26.8
*: Estimated.
Source: DGCI&S.

41
IV.4 HUMAN TRAFFICKING:

Yes, industry of the human trafficking which is India’s one of the most
horrendous mafia working and kidnapping innocent little girls, women and use
them as sex workers has been come to a grinding halt. Recently, the rescue
workers on the ground revealed this information. According to the study, until
November the girls are kidnapped from all over the country every year, and
are transported to different places both nationally and internationally using
middleman. The trafficked persons are sold to brothels, placement agencies
and as child brides. Many times, people who indulge in black magic also buy
them through dealers.
But ever since the demonetization was declared on November 8th, the rescue
workers have said that the trafficking has been stopped completely and not a
single girl has been trafficked!! The rescue workers told that they had never
seen the human trafficking business shut off from root any time before.
All the selling and buying transactions of human trafficking used to happen
through cash and now the operators and mafia heads do not have money to
pay to the middleman. These people mostly used 500 and 1000 rupee notes
as it was easy, but now there is no cash liquidity that has badly hit the
business.
Nobel Prize winner Kailash Satyarthi said, “After demonetization, the brothel
owners have literally lost their business since they cannot exchange money in
banks and new currency is not readily available in the markets yet. So the
customers have stopped going to brothels and brothel owners since they have
no cash to pay them”. He also added to his statement that his team met the
Prime Minister appraised him about the development and suggested to take
further steps to ensure that black money doesn’t get accumulated in the
system again.

42
IV.5 HAWALA TRADING:

Demonetization has impacted an unprecedented hit on the hawala trading.

After demonetization, Hawala operators in India, Pakistan & Dubai say that
only 3-5% of the trade is functioning.
According to the media reports during the initial period of demonetization,
Delhi a hub of money laundering & the agents in the city were tremendously
affected. Many of them had even closed shops as both customers & cash
were negligible following the 8th of November.
Gujarati hawala traders working in the capital city of the country were mostly
affected & then run the risk of going bankrupt. Their usual custom was to shut
down offices for Diwali & go back to Gujarat for 15-20 days. But after 8th of
November, these traders haven’t even returned back to Delhi. The cash that
was kept by these people in great volume has become useless after the
announcement of demonetization.
Such channels of money laundering are the life saving rope of drug dealers,
terrorists & other criminals. With just 3-5% of the trade still intact, it is but
obvious that terrorism & other mafia activities have suffered a huge blow.
According to reports of investigation agencies these hawala and money
laundering networks are attempting to restore their business by parking new
currency in neighbouring countries. But the officials are tightening the screws
especially near Bangladesh & ensuring that this is kept to a bare minimum.

43
IV.6 RAILWAY TICKET BOOKINGS:

As of November 2016, Indian Railways did not have the option to make
payment with cards at the counters. After the demonetization move, the
government announced to make card payment options available at railway
counters in the country. In a statement from the Railway Ministry states, “With
a view to facilitate convenient booking of reserved and unreserved tickets by
passengers through cashless modes of payment at the ticket booking
counters, it has been decided to install 10,000 POS (Point of Sale) (Swipe)
machines at the PRS (Passenger Reservation System) and UTS counters
(including Suburban stations).”
Railways have more than 13,000 ticket booking counters across the country.
In the long term, their plan is to equip all its ticket counters with POS
machines. It is also planning to accept payments through mobile wallets.
But as the Indian Railways on Monday said it will accept old demonetized
bank notes of ₹500 and ₹1,000, for buying tickets and for onboard catering till
24 November. Indian Railways authorities observed that a large number of
people started booking tickets particularly in 1A and 2A classes for the longest
distance possible, to get rid of unaccounted cash.
A senior railways official reportedly said that 4.27 crore passengers were
nationally booked across all classes. Out of these, the number of passengers
booked, when 27,237 passengers had booked tickets in 1A and 69,950 in 2A
on 9th November."
After a very short time, The Railways Ministry and the Railway Board
responded and decided that ticket cancellation and refund of tickets of value
₹10,000 and above will not be allowed to given in cash by any means. The
payment can only be through cheque/electronic payment. Tickets above
₹10,000 can be refunded by filing ticket deposit receipt only on surrendering
the original ticket. For any cash transaction above ₹50,000 a copy of the PAN
card must be submitted.

44
IV.7 TRANSPORTATION HALTS:

India’s apex transporters body, All India Motor Transport Congress (AIMTC)
claiming to have 93 lakhs truckers, 50 lakhs buses and tourist taxis and cab
operators under the demonetization’s bend.

"Our about 4 lakh trucks are stranded across India with about 8 lakh drivers
and conductors have been severely impacted due to demonetizing the ₹500
and ₹1,000 notes. The sudden ban on higher denomination notes have made
them stand in long queues before banks in different parts. The withdrawal limit
is minuscule with ATMs at many places not working and paralyzing the
transport business," said AIMTC president Bhim Wadhwa demanding speedy
increase in cash withdrawal limits.

45
IV.8 E-COMMERCE BUSINESS:

With the ban on ₹500 and ₹1,000 currency notes, eCommerce players were
forced to stop “cash-on-delivery” payment modes on their site. Certain
eCommerce players like Flipkart and Snapdeal made restrictions on the order
purchase value to below ₹1,000. While Amazon India stopped Cash-on-
Delivery orders, a day after the big announcement. These eCommerce
companies also stopped receiving old denomination notes of ₹500 and ₹1,000
and paid more emphasis on other means of digital payments.
The Demonetization move has hurt the eCommerce conversions of various
companies from Flipkart to Zomato, which is a food discovery and delivery
portal with other companies that mainly generate revenues through hard cash
that accounts for around 60-70% of total orders. With fall in CoD orders,
demonetization has led to jump in digital payment options for making online
transactions. As per a research done by the Forrester Research, “The cash
on delivery share will come down and it will force customers to make
payments online. Initially, in the next 1-2 months it may hurt ecommerce
companies.”
Demonetization has given a boost to digital payments and is encouraging
people to shop online more. This will definitely provide an opportunity for
ecommerce players to push customers towards adopting cashless
instruments and recalibrate business models to incentivize cashless
instruments.

46
IV.9 MUNICIPAL & LOCAL TAX PAYMENT:

After demonetization, Government of India allowed the use of demonetized

notes of ₹500 and ₹1,000 for the payment of municipal and local body taxes, it
led to people using demonetized currency notes to pay large amount of
outstanding and advance taxes. In the return, the collection of revenue from
taxes of civic bodies increased tremendously.
As per media reports, Municipal tax collection in Gujarat has risen almost six-
fold in just three working days after 8th November, all thanks to the
demonetization of high value currency notes. The Gujarat Municipal Finance
Board (GMFB) said that municipal bodies of whole Gujarat collected ₹171
crore in those three days. Ahmedabad Municipal Corporation (AMC) collected
₹54.5 crore tax those of Surat collected ₹43.8 crore, Rajkot and Vadodara got
₹13 crore and ₹5.4 crore, respectively.
The revenue generation by tax collection by local bodies have surged over
260% and more than ₹15000 crore collected after 14 days of demonetization.
According to Finance Minister Arun Jaitley, the total indirect tax collection rose
to 14.2% only in the month of December.

47
IV.10 REAL ESTATE SECTOR:

In the context of Real estate sector demonetization was found to be a short

term restless situation, particularly for land deals, commercial transactions,
hospitality or retail. Small builders and those in specific cities/ micro markets
where cash dealing was more prevalent will be most impacted. Registration
prices in residential space also gone up to adjust for cash component.
Therefore, resale of property impacted more than primary sales. Organized
real estate sector also faced demand slowdown for a short while, largely due
to ‘wait and watch’ susceptibility of buyers and investors.

IV.11 FAKE CURRENCY:

The impact on the fake currency would be more significant. Many dealers with
the existing counterfeit notes would be trapped, as they would have to take
the notes to the bank and have better chances of getting their racket exposed.
Thus, they have only option to destroy their notes and incur losses. A study
done by National Investigation Agency (NIA) and India Statistical Institute in
2016 estimated that fake Indian currency notes in circulation have a face
value of Rs 400 crore. This works out to 0.022% of the currency which was
demonetized. Countries which face the issue of fake currency resort
to phased replacement of old series of notes with new notes that have better
security features. Worldwide demonetization is generally not used as a tool to
deal with counterfeiting.

48
IV.12. PRADHAN MANTRI GARIB KALYAN YOJANA:

Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY) is a pardoning scheme

launched by the PM Modi led Government of India in December 2016 on the
lines of the Income declaration scheme, 2016 (IDS) launched earlier in the
year. A part of the Taxation Laws (Second Amendment) Act, 2016, the
scheme provides an opportunity to declare unaccounted wealth and black
money in a confidential manner and avoid prosecution after paying a fine of
50% on the undisclosed income. An additional 25% of the undisclosed income
is invested in the scheme, which can be refunded after four years, without any
interest.
Valid from 16th December, 2016 to 31st March, 2017, the scheme can only be
availed to declare income in the form of cash including old demonetized bank
notes of ₹500 and ₹1,000 or bank deposits in Indian bank accounts and not in
the form of jewellery, stock, immovable property, or deposits in overseas
accounts.

49
IV.13 FORECAST OF GDP BY GLOBAL AGENCIES:

After looking and assuming the impact of the demonetization on the Indian
economy, Global analysts cut their forecasts of India's GDP growth rate due
to demonetization. India's GDP for the financial year 2016-2017, earlier in
2016 was 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 crores) for
the Indian economy.

Table 6 : GDP Forecasting by various agencies

2016-17
Agency
Pre-demonetization Post-demonetization
IMF 7.6 6.6
World Bank 7.6 7.0
ADB 7.4 7.0
Economic Survey, Government of India 7.0 to 7.75 6.5 to 6.75
Morgan Stanley 7.7 7.3
HSBC 7.4 6.3
Nomura 7.8 7.1
Goldman Sachs 7.6 6.3
ICRA 7.9 6.8
CARE Ratings 7.8 6.8
CRISIL - 6.9
FITCH 7.4 6.9
BofA-ML 7.4 6.9
Sources: Growth projections by the Financial Institutions and Rating Agencies were compiled
on the basis of media reports published during November and December 2016.

50
 PART 2 – PRIMARY STUDY

CHAPTER V
INTRODUCTION OF THE PRIMARY STUDY

51
V.1 Review of Literature:
The demonetization of the old ₹500 & ₹1,000 notes has been a fascinating
and intriguing subject matter of numerous researches from various disciplines
because of its great significance and immediate impact on the state of the
Indian economy as a whole and particularly each and every sector of the
country working with cash. Being a recent move, there have been various
researches on different aspects of the initiative ranging from the economical
to social and ethical dimensions. Some of these researches retrieved through
internet searches have been reviewed here.

1.) The view point of Rajni Arora in her article published on 5 th November,
2012 study of different aspects of black money and its relationship with policy
and administrative measures in our country reflects the policy and strategies
that the Government has been pursuing in the context of recent initiatives, or
need to take up in the near future, in order to address the issue of black
money and corruption in public life. She concludes that there is no doubt that
existence of black money has a significant impact on social, economic and
political levels of our lives which has a significant effect on the institutions of
governance and conduct of public policy in the country. So we can’t say that
India is a poor nation. Infact, India is amongst the Richest Nations if Stashed
Black Money is brought back & converted to White Money and fresh
generation of Black Money is put to an end.

2.) Arpit Guru and Shruti Kahanijow (2010) researchers analyzed the black
money income? Need for amendment in DTAA & ITEA and analyzed that
black money is spread everywhere in India up to a large extent which
continuously stashed towards abroad in a very large amount. The researcher
also identified how black money had caused menaces in our economy and in
what ways it is used.

3.) Care Rating in their study: Professional Risk opinion – 2016), suggested
that the initial disruptions in the system, eventually change well assimilated
and will prove positive for the economy in the long run. Black money hoarders

52
will definitely lose out and eventually boosting the formal economy in the long
run. Short-term fall in real estate prices might benefit middle class citizens.
This move by the Government along with the implementation of the GST will
eventually make the system more accountable and efficient.

4.) Veerakumar. K, (2017), in his paper analyzed demonetization is taken for

several measures such as tax evasion, counterfeit currency and funding of
illegal activities. Some people are depositing currency notes in excess of
specified limits directly into bank accounts and has showed the unaccounted
income subject to higher tax and other penalties. Alternative payment
methods such as e-wallets, online transactions using e-banking, debit and
credit card usage have been increased and this will shift an efficient cashless
infrastructure.

5.) Tax Research Team (2016) of the National Institute of Public Finance and
Policy published their study called Demonetization: Impact on the economy,
The main objective is to analyze the impact of demonetization on Indian
economy and it shows the impact of such a move on the availability of credit,
spending level of activity and government finances. They concluded the study
by the opinion as, The demonetization undertaken by the government is a
large shock to the economy. The impact of the shock in the medium term is a
function of how much of the currency will be replaced at the end of the
replacement process and the extent to which currency in circulation is
extinguished. While it has been argued that the cash that would be
extinguished would be “black money” and hence, should be rightfully
extinguished to set right the perverse incentive structure in the economy, this
argument is based on impressions rather than on facts. While the facts are
not available to anybody, it would be foolhardy to argue that this is the only
possibility. As argued above, it is possible that these cash balances were
used as a medium of exchange. In other words, while the cash was mediating
in legitimate economic activity, if this currency is extinguished there would be
a contraction of economic 182 activity in the economy and that is a cost that
needs to be factored in while assessing the impact of the demonetization on
the economy and its agents. It is likely that there would be a spurt in the

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banking deposits. While interpreting the phenomenon, however, one has to
keep in mind that a large part of their deposits were earlier used for
transactional purposes.

6.) Prof. Sandeep Kaur, an assistant professor in Khalsa College, Mahilpur in

his research paper published in International Journal of Research about the
impact of demonetization concludes that this is a historical step by the Modi
Government and should be supported by all. This decision of government will
definitely fetch results in the long term. From an equity market perspective,
this move would be positive for sectors like Banking and Infrastructure in the
medium to long term. This could be negative for sectors like Consumer
Durables, Luxury items, Gems and Jewellery, Real Estate and allied sectors,
in the near to medium term. This move can lead to improved tax compliance,
better fiscal balance, lower inflation, lower corruption, complete elimination of
fake currency and another stepping stone for sustained economic growth in
the longer term.

7.) Boulding (1950), shows that the state’s fiscal policy mostly deals with
quantity of money supply and the monetary policy sets regulation and
determines its prices i.e., short-term interest rates in the markets. To boost
the aggregate demand, Friedman (1969) has proposed the concept of
“helicopters money”, an irreversible increase in the supply of fiat money by the
State. In contrast to Friedman (969), Minsky (1986; p. 249) has viewed that
money is created and destroyed endogenously at the normal course of
banking business [6]. He has considered money as a “medium of payment”,
instead of as a “medium of exchange” given that taxes bring value to the
states, and has replaced the “state money” concept in knapp (1924) with the
“bank money” concept in Schumpeter (1934). Goodhart (1989) criticises that
the orthodox money view keeps “neutral” from the problems the authority is
facing for any given high-power money base as if it “is under their control, all
their operational problems …. have been resolved” Goodhart (1989, p. 129)

8.) Sukanta Sarkar (2010), conducted a study on the parallel economy in

India: Causes, impacts and government initiatives in which the researcher

54
focused on the existence of causes and impacts of black money in India.
According to the study, the main reason behind the generation of black money
is the Indian Political System that is the Indian government just focused on
making committees rather than to implement it. The study concludes that laws
should be implemented properly to control black money in our economy

9.) Geeta Rani (2016), in her study shows that initially the demonetization
effects on market were painful but this investigate the shopkeepers and
consumers to adopt cashless means such as paytm, debit card use, internet
banking to buy goods. By adopting the cashless means economy will be
sound in coming time and Indian Economy will get benefits of early and
hassle free transactions.

10.) Prof. Prabhat Patnaik (2016) in his article published in

Countercurrent.org summarized the demonetization by concluding it as; “The
summary way demonetization has been effected is leading to a riot like
situation in the country. We demand that the Government ensure that
common people have immediate access to enough money to pay for their
daily needs and health emergencies. Failing which, we demand the rollback of
demonetization or suspension of demonetization to enable the common
person to make adequate arrangements for daily needs and for more orderly
phasing out of the old notes. The role of the Government is to undertake
honest tax administration and not to treat the common person like a criminal
making him/her stand in line and filling forms to access his/her own legitimate
money.”

11.) Rahul Deodhar, an investor and an author in his book Black Money and
Demonetization said that demonetization will not eliminate black money by
itself alone. It is just one move of one piece in the chess board of black
money. To check-mate the black money king, you have to win the board.
There are various steps required as detailed in his book, ‘black money and
demonetization’. Government can play all these moves and still fail if they play
improperly. All we can say is that Government is playing well. But will it

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succeed? The efforts will bring massive amounts of cash into the banking
system – a benefit in itself. Once the money is in the legitimate channels, it
should be better utilized and revenue will be generated from its use. If that is
success enough then yes.

12.) Dr. Dinesh Kumar Gupta, a Ph.D in management holder author in his
research about the demonetization concluded that Inspite of a number of
criticism of the big step of demonetization, it is true that proponents of
demonetization certainly had good intentions, which proved with the
overwhelming response to the government in the assembly polls of February
and March 2017, but the suffering it has caused to millions of Indians is
unwarranted. Government has come out with a number of incentives on
cashless transactions like waiver of surcharge on transactions in cashless
mode. But the banks find difficulty in getting other alternate modes of revenue
generation. Specially the Public Sector Banks, which are already burdened
with whooping NPA and subsidies on a number of credit schemes and they
are extending services in the remotest areas of the country, inspite of losses,
just for the cause of rural banking and bank to the unbanked. As far the other
motives behind the big step are concerned, only the time can tell as the steps
for curbing of black money may have far reaching effects and will be visible in
the time to come. It is hoped that the general public will adopt the cash less
mode of banking transactions wholeheartedly in their own interest and
understand the need of hour. It is also hoped that the huge amounts spent on
technology up gradation by the banks for secured and hassle free alternate
channel banking, will not go waste and the trigger for cashless adoption by
the general masses will gain momentum.

13.) Dr. Paritosh Chandra Sinha, in his research Demonetization of the

Indian Economy: Philosophical Research stated conclusion as, “The
demonetization drive has boosted the aggregate deposit base in the hands of
the banks and resulted huge savings. It can improve monetary transfusion in
the economy and can reduce lending rate. It can enlarge tax net, induce
positive impact in the bond market, create rooms for monetary
accommodation and financial inclusion via Jan Dhan Yojana, and finally, it

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can enhance the GDP growth potentials of the nation state. The heterodox
school argues that the government may create a reserve capacity for future
spending without causing inflation.

14.) G R Hari, Chief Executive Partner of Manohar Chowdhry & Associates

Chartered Accountants firm in his report study demonetization as the term
demonetization has become much more than a household name since the old
Rs 500 and Rs 1,000 notes were pulled out of circulation. While as per
dictionary demonetization means "ending something (e.g. gold or silver) that
is no longer the legal tender of a country", one needs to understand that there
is much more than the literal meaning to the word. One need to understand
that 80% of India's labour force is employed in the informal sector, which
comprise of 45% of the GDP of our country. Over 60% of population of India
lives in below the international poverty threshold line of 1.9$ per day. Since
our economy is an under banked economy, present demonetization move,
would no doubt cause a severe social experiment, across the segment of our
population. At the first place, and on a short term basis this move would
benefit the Government, which shall effectively deploy its resources to
percolate the impact to the poor and needy of our country.

15.) Biswajit Chatterjee, in an article Square Patton Boggs reviewed the

impact of demonetization by concluding his article as, “the comprehensive
long term impact of these demonetization measures cannot be fully
ascertained at this stage, the overall economy is expected to benefit from a
decrease in unaccounted cash transactions and an elimination of counterfeit
currency notes, leading to more effective tax collection and increased
transparency in ascertaining transaction costs. An increase in transparency is
also likely to improve attractiveness for foreign investors, while higher bank
deposits and formalizing large hitherto unaccounted for income streams is
expected to improve the fiscal deficit of India.”

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V.2 BACKGROUND OF THE STUDY:

India is facing problem of black money in the currency form and fake currency
notes. To eliminate that problem from roots, Government introduced
demonetization. The study of impact of demonetization is conducted to
research on its impact over the agents of the macro economy and the
economy as a whole and to know about the preferences and opinions of the
individual persons to get the general view.

The research of the impact of demonetization over economy was done

through secondary source of data such as previous research papers, articles,
news articles and review by experts.

The research of its impact on individuals was studied by carrying out survey in
the form of questionnaires filled by individual persons. In the questionnaire
individuals have to give their response about the questions regarding the
aftereffect of currency ban and their review about the experience of whole
demonetization move.

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V.3 OBJECTIVES OF THE STUDY:

 To gain the knowledge about the whole demonetization move in India.

 To understand its impact on the Indian economy.
 To understand the changes in government policies to promote digital
modes of payment.
 To understand the benefits to the government by the demonetization.
 To understand the preferences and opinions of general public over
demonetization.

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 CHAPTER VI
RESEARCH METHODOLOGY

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VI.1 RESEARCH:

Research in common parlance refers to a search for knowledge. Once can

also define research as a scientific and systematic search for pertinent
information on a specific topic. In fact, research is an art of scientific
investigation. The Advanced Learner’s Dictionary of Current English lays
down the meaning of research as “a careful investigation or inquiry specially
through search for new facts in any branch of knowledge.” Redman and Mory
define research as a “systematized effort to gain new knowledge.”
Some people consider research as a movement, a movement from the known
to the unknown. It is actually a voyage of discovery. Research is an academic
activity and as such the term should be used in a technical sense.
According to Clifford Woody research comprises defining and redefining
problems, formulating hypothesis or suggested solutions; collecting,
organising and evaluating data; making deductions and reaching conclusions;
and at last carefully testing the conclusions to determine whether they fit the
formulating hypothesis.
D. Slesinger and M. Stephenson in the Encyclopaedia of Social Sciences
define research as “the manipulation of things, concepts or symbols for the
purpose of generalising to extend, correct or verify knowledge, whether that
knowledge aids in construction of theory or in the practice of an art.”
Research is, thus, an original contribution to the existing stock of knowledge
making for its advancement. It is the pursuit of truth with the help of study,
observation, comparison and experiment. In short, the search for knowledge
through objective and systematic method of finding solution to a problem is
research. The systematic approach concerning generalization and the
formulation of a theory is also research.
As such the term ‘research’ refers to the systematic method consisting of
enunciating the problem, formulating a hypothesis, collecting the facts or data,
analysing the facts and reaching certain conclusions either in the form of
solutions(s) towards the concerned problem or in certain generalizations for
some theoretical formulation.

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VI.2 OBJECTIVES OF RESEARCH:

The purpose of research is to discover answers to questions through the

application of scientific procedures. The main aim of research is to find out the
truth which is hidden and which has not been discovered as yet. Though each
research study has its own specific purpose, we may think of research
objectives as falling into a number of following broad groupings:

1. To gain familiarity with a phenomenon or to achieve new insights into it

(studies with this object in view are termed as exploratory or
formulative research studies);
2. To portray accurately the characteristics of a particular individual,
situation or a group (studies with this object in view are known as
descriptive research studies);
3. To determine the frequency with which something occurs or with which
it is associated with something else (studies with this object in view are
known as diagnostic research studies);
4. To test a hypothesis of a causal relationship between variables (such
studies are known as hypothesis-testing research studies).

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VI.3 TYPES OF RESEARCH:
The basic types of research are as follows:

1. Descriptive vs. Analytical:

Descriptive research includes surveys and fact finding enquiries of

different kinds. The major purpose of descriptive research is
description of the state of affairs as it exists at present. In social
science and business research we quite often use the term Ex post
facto research for descriptive research studies. The main
characteristic of this method is that the researcher has no control
over the variables; he can only report what has happened or what is
happening. Most ex post facto research projects are used for
descriptive studies in which the researcher seeks to measure such
items as, for example, frequency of shopping, preferences of
people, or similar data. Ex post facto studies also include attempts
by researchers to discover causes even when they cannot control
the variables. The methods of research utilized in descriptive
research are survey methods of all kinds, including comparative
and correlational methods. In analytical research, on the other
hand, the researcher has to use facts or information already
available, and analyze these to make a critical evaluation of the
material.

2. Applied vs. Fundamental:

Research can either be applied (or action) research or fundamental

(to basic or pure) research. Applied research aims at finding a
solution for an immediate problem facing a society or an
industrial/business organization, whereas fundamental research is
mainly concerned with generalizations and with the formulation of a
theory. “Gathering knowledge for knowledge’s sake is termed ‘pure’
or ‘basic’ research.”4 Research concerning some natural
phenomenon or relating to pure mathematics are examples of

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 fundamental research. Similarly, research studies, concerning
human behavior carried on with a view to make generalizations
about human behavior, are also examples of fundamental research,
but research aimed at certain conclusions (say, a solution) facing a
concrete social or business problem is an example of applied
research. Research to identify social, economic or political trends
that may affect a particular institution or the copy research
(research to find out whether certain communications will be read
and understood) or the marketing research or evaluation research
are examples of applied research. Thus, the central aim of applied
research is to discover a solution for some pressing practical
problem, whereas basic research is directed towards finding
information that has a broad base of applications and thus, adds to
the already existing organized body of scientific knowledge.

3. Quantitative vs. Qualitative:

Quantitative research is based on the measurement of quantity or

amount. It is applicable to phenomena that can be expressed in
terms of quantity.
On the other hand, Qualitative research, is concerned with
qualitative phenomenon, i.e., phenomena relating to or involving
quality or kind. This type of research aims at discovering the
underlying motives and desires, using in depth interviews for the
purpose. Other techniques of such research are word association
tests, sentence completion tests, story completion tests and similar
other projective techniques. Attitude or opinion research i.e.,
research designed to find out how people feel or what they think
about a particular subject or institution is also qualitative research.
Qualitative research is specially important in the behavioral
sciences where the aim is to discover the underlying motives of
human behavior. Through such research we can analyze the
various factors which motivate people to behave in a particular

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 manner or which make people like or dislike a particular thing. It
may be stated, however, that to apply qualitative research in
practice is relatively a difficult job and therefore, while doing such
research, one should seek guidance from experimental
psychologists.

4. Conceptual vs. Empirical:

Conceptual research is that related to some abstract idea(s) or

theory. It is generally used by philosophers and thinkers to develop
new concepts or to reinterpret existing ones. On the other hand,
empirical research relies on experience or observation alone, often
without due regard for system and theory. It is data-based research,
coming up with conclusions which are capable of being verified by
observation or experiment. We can also call it as experimental type
of research. In such a research it is necessary to get at facts
firsthand, at their source, and actively to go about doing certain
things to stimulate the production of desired information. In such a
research, the researcher must first provide himself with a working
hypothesis or guess as to the probable results. He then works to
get enough facts (data) to prove or disprove his hypothesis. He then
sets up experimental designs which he thinks will manipulate the
persons or the materials concerned so as to bring forth the desired
information. Such research is thus characterized by the
experimenter’s control over the variables under study and his
deliberate manipulation of one of them to study its effects. Empirical
research is appropriate when proof is sought that certain variables
affect other variables in some way. Evidence gathered through
experiments or empirical studies is today considered to be the most
powerful support possible for a given hypothesis.

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5. Some Other Types of Research:

All other types of research are variations of one or more of the

above stated approaches, based on either the purpose of research,
or the time required to accomplish research, on the environment in
which research is done, or on the basis of some other similar factor.
Form the point of view of time, we can think of research either as
one-time research or longitudinal research. Research can be field-
setting research or laboratory research or simulation research,
depending upon the environment in which it is to be carried out.
Research can as well be understood as clinical or diagnostic
research. Such research follow case-study methods or indepth
approaches to reach the basic causal relations. Such studies
usually go deep into the causes of things or events that interest us,
using very small samples and very deep probing data gathering
devices. The research may be exploratory or it may be formalized.
The objective of exploratory research is the development of
hypotheses rather than their testing, whereas formalized research
studies are those with substantial structure and with specific
hypotheses to be tested. Historical research is that which utilizes
historical sources like documents, remains, etc. to study events or
ideas of the past, including the philosophy of persons and groups at
any remote point of time. Research can also be classified as
conclusion-oriented and decision-oriented. While doing conclusion
oriented research, a researcher is free to pick up a problem,
redesign the enquiry as he proceeds and is prepared to
conceptualize as he wishes. Decision-oriented research is always
for the need of a decision maker and the researcher in this case is
not free to embark upon research according to his own inclination.
Operations research is an example of decision oriented research
since it is a scientific method of providing executive departments
with a quantitative basis for decisions regarding operations under
their control.

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VI.4 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem.

It may be understood as a science of studying how research is done
scientifically. In it we study the various steps that are generally adopted by a
researcher in studying his research problem along with the logic behind them.
It is necessary for the researcher to know not only the research
methods/techniques but also the methodology. Researchers not only need to
know how to develop certain indices or tests, how to calculate the mean, the
mode, the median or the standard deviation or chi-square, how to apply
particular research techniques, but they also need to know which of these
methods or techniques, are relevant and which are not, and what would they
mean and indicate and why. Researchers also need to understand the
assumptions underlying various techniques and they need to know the criteria
by which they can decide that certain techniques and procedures will be
applicable to certain problems and others will not. All this means that it is
necessary for the researcher to design his methodology for his problem as the
same may differ from problem to problem. For example, an architect, who
designs a building, has to consciously evaluate the basis of his decisions, i.e.,
he has to evaluate why and on what basis he selects particular size, number
and location of doors, windows and ventilators, uses particular materials and
not others and the like. Similarly, in research the scientist has to expose the
research decisions to evaluation before they are implemented. He has to
specify very clearly and precisely what decisions he selects and why he
selects them so that they can be evaluated by others also.

The scope of research methodology is wider than that of research methods.

Thus, when one talk of research methodology he not only talk of the research
methods but also consider the logic behind the methods he use in the context
of our research study and explain why he is using a particular method or
technique and why he is not using others so that research results are capable
of being evaluated either by the researcher himself or by others.

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Why a research study has been undertaken, how the research problem has
been defined, in what way and why the hypothesis has been formulated, what
data have been collected and what particular method has been adopted, why
particular technique of analysing data has been used and a host of similar
other questions are usually answered when we talk of research methodology
concerning a research problem or study.

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VI.5 MARKET RESEARCH

Market research is the systematic gathering, recording, and analysis of data

about issues relating to marketing products and services. The term is
commonly interchanged with market research; however, expert practitioners
may wish to draw a distinction, in that market research is concerned
specifically with markets, while marketing research is concerned specifically
about marketing processes.
Marketing research is often partitioned into two sets of categorical pairs, either
by target market:
 Consumer marketing research, and
 Business-to-business (B2B) marketing research
-The first is consumer market research. The goal is to study the purchasing
habits of consumers. This can be done by tallying up how much of a product
is sold, through surveys or through other means. The information gathered
from consumers can be used to analyze current marketing campaigns and to
create new ones. Consumer marketing research is a form of applied sociology
that concentrates on understanding the preferences, attitudes, and behaviors
of consumers in a market-based economy, and it aims to understand the
effects and comparative success of marketing campaigns. The field of
consumer marketing research as a statistical science was pioneered by Arthur
Nielsen with the founding of the ACNielsen Company in 1923.

-The second type of marketing research is business to business (B2B)

research, which studies how businesses sell products and services to other
businesses. For example, Company Asells computer equipment to companies
B and C. Someone may be interested in seeing how companies B and C
found out about the equipment, how company A marketed its product and
how good the market for that product is.

Marketing research is not the same as market research. Marketing research

studies how and why consumers and businesses buy, and how those sales
can be increased or why they have decreased. It involves in-depth studies

69
into the affect of advertisements and market conditions on consumers. Market
research is the research that may be done into a single market, focusing on
the size and trends in that market.
Market research can also prove helpful if you want to explore business
opportunities in new markets. Market research can be conducted by two
methods, primary research or secondary research.

1. Primary Market Research

Primary research refers to information that is directly collected from the

source. Another simple method of primary research would be to directly talk to
your customers and get their feedback. Primary research can be both
qualitative and quantitative.

A. Qualitative Primary Research

Qualitative primary research involves gathering information from interviews or

focus groups.
 Open-ended interviews include questions that cannot be answered with
a yes or no. You can get a lot of information from such interviews and
also find out about the dislikes, likes, requirements, trends and
emotional motivators of your primary market
 A focus group should ideally be led by experienced professionals who
can lead a group of 6 or more people and ask them both general and
specific questions. Since trained professionals are required to handle
focus groups, they are very expensive.

B. Quantitative Primary Research

Quantitative primary research involves the collection of numerical information

from surveys. This information is then analyzed.

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  Surveys can provide you with the information you require if the survey
has meaningful questions. More people would be willing to take a
survey as it takes less time. The cheapest and easiest way of
conducting a survey is through the telephone and on the place where
your product is being sold.

2. Secondary Market Research

Secondary research is more economical and easier to do when compared to

primary research. Here you will have to analyze the information that has been
collected for some other reason. You can find the data that you require
through a set of articles, demographic/ statistical data, studies etc.
By investing in secondary market research you can analyze your target
markets, evaluate your competitors and assess political, social and economic
factors. The internet has a large number of secondary data sources and most
resources, magazines and press releases are now available online.

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VI.6 RESEARCH PROCESS

Research process consists of series of actions or steps necessary to

effectively carry out research and the desired sequencing of these steps.
The research process consists of a number of closely related activities i.e.,
steps, However, the following order concerning various steps provides a
useful procedural guideline regarding the research process:
(1) Formulating the research problem;
(2) Extensive literature survey;
(3) Developing the hypothesis;
(4) Preparing the research design;
(5) Determining sample design;
(6) Collecting the data;
(7) Execution of the project;
(8) Analysis of data;
(9) Hypothesis testing;
(10) Generalizations and interpretation, and
(11) Preparation of the report or presentation of the results, i.e., formal write
up of conclusions reached.

1. Formulating the research problem:

There are two types of research problems, viz., those which relate to
states of nature and those which relate to relationships between
variables. At the very outset the researcher must single out the
problem he wants to study, i.e., he must decide the general area of
interest or aspect of a subject-matter that he would like to inquire into.
Initially the problem may be stated in a broad general way and then the
ambiguities, if any, relating to the problem be resolved. Then, the
feasibility of a particular solution has to be considered before a working
formulation of the problem can be set up. The formulation of a general
topic into a specific research problem, thus, constitutes the first step in
a scientific enquiry. Essentially two steps are involved in formulating
the research problem, viz., understanding the problem thoroughly, and

72
 rephrasing the same into meaningful terms from an analytical point of
view.

2. Extensive literature survey:

Once the problem is formulated, a brief summary of it should be written
down. It is compulsory for a research worker writing a thesis for a Ph.D.
degree to write a synopsis of the topic and submit it to the necessary
Committee or the Research Board for approval. At this juncture the
researcher should undertake extensive literature survey connected with
the problem. For this purpose, the abstracting and indexing journals
and published or unpublished bibliographies are the first place to go to.
Academic journals, conference proceedings, government reports,
books etc., must be tapped depending on the nature of the problem. In
this process, it should be remembered that one source will lead to
another. The earlier studies, if any, which are similar to the study in
hand should be carefully studied. A good library will be a great help to
the researcher at this stage.

3. Development of working hypotheses:

After extensive literature survey researcher should state in clear terms
the working hypothesis or hypotheses. Working hypothesis is tentative
assumption made in order to draw out and test its logical or empirical
consequences.
How does one go about developing working hypotheses? The answer
is by using the following approach:
(a) Discussions with colleagues and experts about the problem, its
origin and the objectives in seeking a solution;
(b) Examination of data and records, if available, concerning the
problem for possible trends, peculiarities and other clues;
(c) Review of similar studies in the area or of the studies on similar
problems; and

73
 (d) Exploratory personal investigation which involves original field
interviews on a limited scale with interested parties and individuals with
a view to secure greater insight into the practical aspects of the
problem.

4. Preparing the research design:

The research problem having been formulated in clear cut terms, the
researcher will be required to prepare a research design, i.e., he will
have to state the conceptual structure within which research would be
conducted. The preparation of such a design facilitates research to be
as efficient as possible yielding maximal information. In other words,
the function of research design is to provide for the collection of
relevant evidence with minimal expenditure of effort, time and money.
But how all these can be achieved depends mainly on the research
purpose.
5. Determining sample design:
All the items under consideration in any field of inquiry constitute a
‘universe’ or ‘population’. Hence, quite often we select only a few items
from the universe for our study purposes. The items so selected
constitute what is technically called a sample.
The researcher must decide the way of selecting a sample or what is
popularly known as the sample design. In other words, a sample
design is a definite plan determined before any data are actually
collected for obtaining a sample from a given population. Thus, the
plan to select 12 of a city’s 200 drugstores in a certain way constitutes
a sample design. Samples can be either probability samples or non-
probability samples. With probability samples each element has a
known probability of being included in the sample but the non-
probability samples do not allow the researcher to determine this
probability. Probability samples are those based on simple random
sampling, systematic sampling, stratified sampling, cluster/area
sampling whereas non-probability samples are those based on

74
 convenience sampling, judgement sampling and quota sampling
techniques.

6. Collecting the data:

In dealing with any real life problem it is often found that data at hand
are inadequate, and hence, it becomes necessary to collect data that
are appropriate. There are several ways of collecting the appropriate
data which differ considerably in context of money costs, time and
other resources at the disposal of the researcher.
Primary data can be collected either through experiment or through
survey. If the researcher conducts an experiment, he observes some
quantitative measurements, or the data, with the help of which he
examines the truth contained in his hypothesis. But in the case of a
survey, data can be collected by any one or more of the following
ways:
(a) By observation
(b) Through personal interview
(c) Through telephone interviews
(d) By mailing of questionnaires
(e) Through schedules
The researcher should select one of these methods of collecting the
data taking into consideration the nature of investigation, objective and
scope of the inquiry, financial resources, available time and the desired
degree of accuracy. Though he should pay attention to all these factors
but much depends upon the ability and experience of the researcher.

7. Execution of the project:

Execution of the project is a very important step in the research
process. If the execution of the project proceeds on correct lines, the
data to be collected would be adequate and dependable. The
researcher should see that the project is executed in a systematic
manner and in time.

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8. Analysis of data:
After the data have been collected, the researcher turns to the task of
analysing them. The analysis of data requires a number of closely
related operations such as establishment of categories, the application
of these categories to raw data through coding, tabulation and then
drawing statistical inferences. The researcher can analyze the
collected data with the help of various statistical measures.

9. Hypothesis-testing:
The hypotheses may be tested through the use of one or more of such
tests, depending upon the nature and object of research inquiry.
Hypothesis-testing will result in either accepting the hypothesis or in
rejecting it.

10. Generalizations and interpretation:

If a hypothesis is tested and upheld several times, it may be possible
for the researcher to arrive at generalization, i.e., to build a theory. As a
matter of fact, the real value of research lies in its ability to arrive at
certain generalizations. If the researcher had no hypothesis to start
with, he might seek to explain his findings on the basis of some theory.
It is known as interpretation.

11. Preparation of the report or the thesis:

Finally, the researcher has to prepare the report of what has been done
by him. Writing of report must be done with great care keeping in view
the following:
1. The layout of the report should be as follows:
(i) the preliminary pages;
(ii) the main text, and
(iii) the end matter.

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In its preliminary pages the report should carry title and date followed
by acknowledgements and foreword. Then there should be a table of
contents followed by a list of tables and list of graphs and charts, if any,
given in the report.
The main text of the report should have the following parts: (a)
Introduction (b) Summary of findings (c) Main report (d) Conclusion.
At the end of the report, appendices should be enlisted in respect of all
technical data. Bibliography, i.e., list of books, journals, reports, etc.,
consulted, should also be given in the end. Index should also be given
specially in a published research report.
2. Report should be written in a concise and objective style in simple
language avoiding vague expressions such as ‘it seems,’ ‘there may
be’, and the like.
3. Charts and illustrations in the main report should be used only if they
present the information more clearly and forcibly.

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VI.7 RESEARCH DESIGN:

A research design is the detailed blueprint used to guide a research study

towards its objectives. It helps to collect, measure and analysis of data.

The present study seeks to find out the people’s opinion towards
demonetization. The study also aims at findings out the impact of
demonetization on individual persons and also the impact of demonetization
on Indian banks, Indian economy and other players of the macro economy.

Nature of Research

The study on impact of demonetization is quantitative in nature.

It is structured, standardized, question based interview.

Types of Question

The types of question asked during the study are straight forward and limited
probing.

Total number of questions: 11

Total number of close ended questions: 11

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SOURCES OF DATA:

 Primary Source

The Primary source of collecting data for research is: Questionnaire filled by
the citizens of the Ahmedabad city.

 Secondary Source

In this study the secondary data is collected from the following sources.

1. Internet websites
2. Research papers
3. Reports of government agencies
4. Reports of banks
5. News reports

Primary Data Collection Methods

Research Technique:
In this study the survey method is used as a research technique. This method
helps to obtain right information from respondents.

Contact Method:
In this study, Personal Exit interview is taken as a tool for the contact method.
In which the personal interview is conducted with citizens of the Ahmedabad
city.

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Sampling Plan:
Sampling is a process of obtaining. The information about the entire
population by exam in part of it .The effectiveness of the research depends on
the sample size selected for the survey purpose.

 Population:
The survey was conducted in Ahmedabad city.

 Sampling Unit:
It means who is to be surveyed. Here target population is decided
and the respondents are the citizens of the Ahmedabad city who
agreed that slightly or largely demonetization effected them.

 Sample size:
For the purpose of proper survey, there is need of perfect research
instruments to find out sample size for more accurate result about
the public opinion for demonetization. The sample size is 100.

 Sampling Procedure:
The sampling procedure followed is convenience.

 Research Instrument:
In this study the research instrument used is a Questionnaire. It
consists of set of question presented to respondents. The
questionnaire is structured and has close ended questions.

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 CHAPTER VII
DATA ANALYSIS AND INTERPRETATION

81
Data of questions asked in the research instrument to the respondents and its
interpretations are as follows:

1. Do you think that black money exists

in India?

9%

Yes
No

91%

From the above diagram of chart, it can be seen that 91% of the total
respondents agreed that Black money exists in India and the rest 9% have
opinion that the country is free from black money.

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 2. Did the demonetization cause
inconvience to you?

No
20%

Yes
54%

Yes, but I don't

mind it
26%

As interpreting from the answers of the respondents, 20% didn’t had any
inconvenience from the demonetization and 54% agreed that demonetization
caused inconvenience to them and 26% answered that they felt
inconvenience but they don’t mind it as they think that demonetization was
necessary to fight against various anti-economy agents.

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 3. How much you spent at ATMs/Banks
to withdraw or exchange money during
fifty days of demonetization?

7%

11%

0-1 hours
1-3 hours
3-8 hours
21% more than 8 hours
61%

The above pie chart gives answer of the respondents that how much time
they spent to exchange or to deposit or to withdraw cash and 61% of the total
sample spent less than 1 hour only, 21% people spent 1 to 3 hours, 11%
people spent 3 to 8 hours and only 7% people have to stand in the que for
more than 8 hours.

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 4. Have you faced any
personal/professional crises due to
severe cash shortage?

49% Yes
51% No

The above chart concludes that 49% i.e. 49 people of the 100 respondents
faced personal or professional cash crises due to shortage and unavailability
of cash in the market. 51% people didn’t face any crises due to less cash.

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 5. How did you manage the cash
shortage?
How did you manage the cash shortage?

Debit/Credit card 66%

E-wallets 31%

Internet Banking 28%

None of the above 12%

The bar diagram shows that 66% respondents used debit/credit card during
demonetization and 31% used e-wallets and 28% accepted to use Internet
banking facility. As respondents were allowed to choose more than 1 answer
the figures in percentage differs and there are the respondents who used
more than 1 cashless option to manage cash shortage.
12% of the total respondents agreed that they didn’t use any of the cashless
option due to unavailability or lack of knowledge to above preferred mode of
payments.

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 6. Are the ATMs/Banks in your locality
being regularly supplied with cash?

Don't know
16%

Yes
36%

No
48%

The respondents were asked to give their opinion about the availability of
cash in Banks and ATMs in their respective locality in the present time. 48%
people still don’t get cash available to them when needed.
36% people have the availability of cash in their locality. 16% people are
unaware of the cash availability as they might not be gone to withdraw cash
from bank or ATM.

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 7. Are you finding it difficult to use
2000 rupees note?

49% Yes
51% No

The above diagram shows that 51% of total respondents are finding new note
of 2000 rupees difficult to be use or to get its change. 49% respondents didn’t
find it difficult.

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 8. What was the impact to your
purchasing power?

8%

41%
Decreased
Unchanged
Increased

51%

From the above pie chart , it can be seen that 51% of the total respondents’
purchasing power during demonetization was unchanged and 41% people
admitted that their purchasing power decreased during the move was in
implementation phase.
However, 8% people found increment in their purchasing power.

89
 9. Do you think the currency ban by
Modi government was the right
decision to fight against black money
60%

50% 48%

42%

40%

30%

20%

10%
10%

0%
Yes Yes, but need much better No
planning

When it asked about their opinion over the objective of demonetization to fight
against black money. 42% respondents agreed about the demonetization as a
right decision by government and 48% people agreed but suggested to take
and implement the decision with better planning.
However, 10% of the total respondents said No to the government’s decision
of demonetization to fight against black money.

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 10. Demonetization will improve the
quality of life of a common man in
India.

19%

Agree
50% Can't say
Disagree

31%

From the above diagram it can be analyzed that 50% respondents agreed that
demonetization will improve quality of life of a common man in the country,
19% respondents disagreed that it won’t make any difference in common
man’s quality of life.
Still 31% of the respondents didn’t have any positive of negative opinion over
the question.

91
 11. What do you think about
implemention of whole
demonetization process?

6%
9%

42% Good Experience

Could improve
Bad Experience
Can't say

43%

When the respondents were asked to provide their view on the experience of
implementation of the whole move of demonetization, 42% people found that
implementation of demonetization was good experience for them and 43%
people emphasized that process and implementation of demonetization could
improve and 9% of the total respondents consider it as a bad experience for
them.
And 6% respondents didn’t have any opinion over it.

92
 CHAPTER VIII
RESULTS AND FINDINGS

93
 Results and findings of the primary data research is that almost
every person agrees that there are people in India who are the
holder of black money that is unaccounted money and money
earned by illegal means which is obviously unrecorded and
unaccounted.
 Demonetization is just a part of process of tackling and removing the
black money in the form of currency and to hit the roots of fake
currency. Almost every person was facing cash crunch and
inconvenience during the phase of those 50 days of demonetization
but many of them accepted the fact of demonetization was
necessary to fight against the determinants which were impacting
negatively on the Indian economy.
 People were ready to stand in llines before banks and ATMs to
deposit and exchange their old notes for the withdrawal of new
currency notes. No matter how long they have to stand, they had the
feeling to contribute to in the surgical strike against the black money,
corruption, inflation and counterfeit notes for the betterment of India.
 Digitalization has ignited them to opt for the digital payment modes
and make cashless society.
 Still there is a threat of fake currency in the new currency notes as
well as the most of the people are not aware about the security
features of the new notes, there are chances of the use of new fake
currency notes with the person who is not fully aware about the new
note.
 Most of the respondents agreed and admired the demonetization
move of the Modi government as a risk taking move but considering
the risks aside, the move was much needed for the fight against
money laundering, terror funding, parallel economy, hyperinflation,
though in the long run, but resulting into betterment of the each
individual citizen of the nation.

94
 CHAPTER IX
LIMITATIONS OF THE STUDY

95
 The major limitation of the study was that it didn’t include the detailed
impact of demonetization on the micro economic agents of the Indian
economy.
 The study doesn’t include the impact of demonetization on the
Financial markets such as Stock Market, Mutual Funds, Derivative
markets.
 The impact of demonetization on the foreign trade as in Import-Export
of the country is not studied in this project report.
 The data interpreted was based on the sample size of 100 respondents
of Ahmedabad city only. So the view of them cannot be generalized or
considered as the opinions of the whole population who got affected by
demonetization.

96
 CHAPTER X
CONCLUSION OF THE STUDY

97
 Overall, the assessment is that the impact of demonetization in India
has been transient, given the information so far.
 The analysis in this paper suggests that demonetization impacted
various sectors of the economy and on individual lives as well..
 However, the adverse impact, in general, was short-term as it was
felt mainly in November and December 2016.
 The impact moderated significantly in January and dissipated by and
large by mid-February 2017, reflecting an accelerated pace of
remonetisation.
 Though the impact on GDP growth was felt in Q3 of 2016-17. The
latest CSO estimates suggest that the impact of demonetization on
GDP growth in Q3 of 2016-17 was felt mostly in real estate and
construction, but because of stronger growth in agriculture,
manufacturing, electricity, and mining, the overall impact on GDP
growth was modest. With remonetisation progressing at a fast pace,
the adverse impact is expected to have reversed from the latter part
of Q4 of 2016-17. GDP growth is estimated to recover significantly in
2017-18.
 The sharp increase in low cost CASA deposits by banks is expected
to have increased banks’ net interest income.
 Jan-Dhan accounts increased by 23.3 million post demonetization,
while deposits under Jan-Dhan accounts increased by Rs. 187
billion (41 per cent).
 Imports of gold increased sharply in November, but moderated in
December.
 There has been a significant improvement in the use of digital
modes of payments post demonetization, although their base is still
small.
 Overall, demonetization has some negative impact, which, however,
has been transient as remonetisation has moved at an accelerated
pace in last twelve weeks. More importantly, demonetization is
expected to have a positive impact over the medium to long-term.

98
 ANNEXURE
QUESTIONNAIRE:

This questionnaire is part of an educational research on the impact of demonetization

at micro level. We would appreciate your honest opinions. Please specify your
appropriate answer in the right box.

Name:
Email id/ Mobile number:
Occupation:

1. Do you think that black money exists in India?

 Yes
 No

2. Did the demonetization cause inconvenience to you?

 Yes
 Yes, but I don’t mind it
 No

3. How much time you spent at ATMs/Banks to withdraw or exchange money during
50 days of demonetization?
 0-1 hour
 1-3 hours
 3-8 hours
 More than 8 hours

4. Have you faced any professional or personal crises due to a severe cash
shortage?
 Yes
 No

5. How did you manage the cash shortage?

 By using E-wallets
 By using Internet bank transfer
 By using Debit/Credit card
 All of the above
 None of the above

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6. Are the ATMs/Banks in your locality being regularly supplied with cash?
 Yes
 No
 Don’t know

7. Are you finding it difficult to use new ₹2000 note?

 Yes
 No

8. What was the impact to your purchasing power?

 Decreased
 Unchanged
 Increased

9. Do you think the currency ban by the Modi government was the right decision to
fight against black money?
 Yes
 Yes but needs much better planning
 No

10. Demonetization will improve the quality of life of a common man in India.
 Agree
 Can’t say
 Disagree

11. What do you think about the implementation of the whole demonetization
process?
 Good experience
 Could improve
 Bad experience
 Can’t say

100
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103