A study on the Impact of Demonetization

Abstract

Demonetization refers to Withdrawal of a particular form of currency from circulation. Demonetization is necessary whenever there is a change of national currency. The old unit of currency must be removed and substituted with a new currency unit. The currency was demonetized first time in 1946 and second time in 1978. On Nov. 2016, the currency is demonetized third time by the present Modi government. This is a bold step taken by the government towards the betterment of the economy and the country. In this paper, we want to discuss the impact of recent demonetization on the Indian system.

The common public and bankers are undoubtedly in hassles in the present scenario. The first question that arises is why was demonetization done at this point of time. Following are certain points which clarify this need:

• To develop a good banking system
• Blocking inflow of fake currency notes used for criminal activities including terrorist activities.
• Destabilizing election campaigns being done through black money.
• Destroying hoardings of public money by few influential people.

 

The positive Impacts are:

• A big attack on Corrupt Practices, Counterfeit Currencies and terrorism.
• Banking System will improve
• Reduction in Government Liability
• Positive Impact on Government revenues
• Neutral impact on Inflation
• Positive impact on Retail Industry
• Tax rates may come down

 

The negative Impacts are:

• Negative Impact on GDP in short run
• Highly negative impact on sectors with high proportion of cash transactions
• Added replacement cost of currency
• Initial hassle to create cashless society.

 

This study investigates how the sudden demonetization move by the Indian government played a role in the society. A sample of around 127 were selected from the city of Guwahati and from some areas of North East India.

 

The aim of the research is to find out the impact of demonetization on the society. This research has also been conducted to see if there is any significant impact among the different factors that is related to demonetization and its outcome.          This study is a causal and conclusive study. The questionnaire was prepared for measuring Impact of demonetization, the implementation process and the perceptions of the people with regards to the government’s intention. The data were analyzed by using statistical tools and data analysis through the questionnaire. It was found out that a lot of factors played a role due to the move taken by the government. There is also a relationship between the implementation, government’s intention and the impact due to this move.