"Impact of Demonetisation on Indian Economy"

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Demonetization denotes to remove a particular form of currency from circulation. It vanishes the status of currency unit as a legal tender. Whenever nation wants to change its currency, demonetization occurs. The current status or forms of money is dragged back from circulation and discharged. (Kaur, 2016)

The Government of India decided to banned large regular currency of 500Rs and 1000Rs notes, it was the two biggest denominations in Indian currency system. This decision has been rolled out by Prime Minister Narendra Modi Ji. This step was mainly targeted towards corruption, black money, terrorism and to encourage the cashless economy, which directly hampered on different sectors of the economy like real estate, automobiles, e-commerce, banking, agriculture, start-up companies, service industries. (Dagar, 2017)

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This was not the first time to demonetized high value notes. It is happened before two times, the government of India demonetized big notes from circulation on 12th Jan 1946 & 16th Jan 1978. This is very clean moved which was engaged by the Indian government for the transparency and better growth of country’s economy. (Srinivas, 2017)

The demonetization was the big surprised to the common people and Indian economy. The main focused was to immediately destroy all 500Rs & 1000Rs. Notes and it was replaced by newly designed, attractive and protected 500 & 2000 rupee notes. This strategy will force each individual who have been hiding their income and provides opportunity to come in front to show off their wealth and to pay income tax returns on the same. (Gupta, 2017)


Demonetization has been played an important role in agriculture operation. This sector indicates a development forecast of at least 4% in 2016-2017. Impact of Demonetization is rarely affected by agriculture growth. Though, it increases hopes of farmers. The production of Kharif food grain was boosted from 124 million tones in the 2015-2016 year, to 135 million tones in the year 2016-2017. As compared with the last year it increased by 9%. Due to the huge waves in the production (57%) prices of food tends towards decreases. The production of Rabbi and Kharif was started to increases. According to current estimate fruits and vegetables has faced 10% decline. (A, 2017)

Foresty & Fishing

In India, farmers normally used cash transaction. due to the demonetization farmers have trouble buying fertilizers, seeds and also in selling crops, consumable products. The demonetization runs to lack of cash to pay for a daily fresh food product. (Shirley, 2017)

Real Estate

This sector is very important in the Indian economy and it has always been observed. It varies according to the economic policies. This sector is mostly affected by the stock market and interest rate changes. this is the third time demonetization which was prepared by Indian authorities. due to this demonetization society will be facing lots of complications. There will be a delay in the uncompleted project because of the higher contribution of black money and cash transaction. but introducing a new act like Benami transaction, Real Estate Regulation Act. (RERA) and currently the demonetization this sector lost its background and transparently be moving forward. (A, 2017)


The digital payment and mobile wallet come in to the play after demonetization. Paytm is India’s most accessible mobile wallet which makes transaction easy and it provides services in 1,200 cities across 850,000 places in India. The anxiety presents due to the demonetization covered by plastic money and cashless transactions at larger scale. Paytm downloaded by 200% and its traffic had raised by 435%. Adding all online transaction in India tends towards increased by 250% after demonetization. The current acceptance of digital transaction by people provides room for E Banking in India. There is incredible growth in mobile banking and uses of Immediate payment system after demonetization. (Balaji, 2017)

Black Money

Honourable Prime Minister Mr Narendra Modi played a tremendous stroke against black money and blocked the supply of black money which has been loaded into the country. Black money producers supply money with respect to the Indian economy which disturbs the foundation of the Indian economy. Due to this demonetization strategy, all black money which is staked inside the country will be either deposited with a large amount of punishment or be solely demolished. (kaur, 2016)


The people which have been using cashless money are far away from the corruption, denotes a small quantity of money in circulation. Corruption can be blocked by using a cashless economy because the digital currency is simply noticeable. No one can ask reward in a cashless economy. Electronics transaction is secure, consuming less time and transparent. The government can simply mark excess of money which collect it illegally in some one’s account. By using this, the government can accurately find out to the black money. (Rajani Gupta, 2017)


The main based of Terror financing is bogus currency and hawala. This is how it works. Duplicate currency is distributed by hawala operators. These hawala operators are connected with the gamblers and smugglers of drugs and arms. Secondarily, they all wind up financing terrorism. The terrorist achieved large money by donation through hawala transaction. all sources of terror financing are now blocked. with the move of demonetization, all those black money is now converted into a piece of paper. (Ashwani Kumar, 2018)


In February, 2017, the Reserve Bank of India declared lower GDP growth to 6.9% for the fiscal year 2016-2017, however it projected overcome in the next year at 7.4%. The International Monetary Fund (IMF) also shows in its annual report that India had estimated low GDP growth to 6.6 % in 2016-2017 due to the impact of demonetization. It also declared that demonetization would not have long term impact on Indian Economy, which would come back to its estimated hike of more than 8% in the upcoming year. (Ghosal, 2017)

Interest Rate

Large amount of transaction would be the enormous impacts of demonetization, specifically land and gold. Due to this rate of inflation decreases, attracts the central bank to cut down interest rates. The huge consequences on interest rate will be the liquidity with which bank will be destroyed. According to CLSA’s found that banks would have profit with higher CASA (Current Account Saving Account) progress which part of $ 190 billion cash chunks gets invest with them. Large amount of deposit hike and remaining poor credit hike would generate space for lending rate cuts and to boost up investment activities. (Dr. Pratap Singh, 2016)

Currency Circulation

The impact of demonetization will be brutal falls on fake currency. After this implementation currency circulation will be checked and it founds, as per earlier assessed that “250 out of every Indian million bank notes were fakes”. The recently 500 & 2000 Rupees notes are not easy to accessible having innovative security features and claims that it is very hard to make them fake.(Shirley, 2017)

Stock Market

The Indian market went down deeper as compared to other emerging market in Asia. The S&P BSE Sensex is decreased by 3.8%, which is more than other Asian emerging market. (Dr. Pratap Singh, 2016). The below table describes Research questions and methodology which is applied by the Researcher in journals for analysing specific information related to the research topic.

Authors Research Questions Methods & Theories Used

Dr. Rupinder Kaur (2016) What is the Short term and Long term Impact of demonetization on Indian Economy Secondary method, the data was gathered from journals, reports, magazines and newspapers. Dr. G Ganesan and B Gajendranayagam (2017) Pre and Post Consequences of Demonetization on various sectors of Indian Economy

To understand the issues of Demonetization Diagnostic, Analytical and secondary data were used. Data were examined with the combination of sample t- Test and regression Analysis. Ashok Botta (2017) Impact of demonetization on different sector of Indian Economy Secondary method was used which is based on Previous available literature. Senthamizhselvi A (2017) How demonetization improve country’s budget

What are the pros and cons of demonetization Secondary method were used like books, articles, reviews to reach to objectives Dr. Pushp Deep Dagar (2017) Analyze the consequences of demonetization on Indian Economy Influence of demonetization on different countries in previous years Article is mainly based on Secondary data method. Vinita Choudhary & 1Dr. Vijayalakshmi Srinivas (2017) To Analyze the effect of demonetization on Indian Financial Market Based on secondary data, data were collected from different bullet lines of RBI, research papers, newspaper articles. Rajani Gupta & Prof. Arvind Kumar (2017) Impact of demonetization on Indian Financial system

To find embezzlement and scam of cash transaction The study is established on secondary sources from various books, relevant websites, journals and including researcher opinion. K. C. Balaji & K Balaji (2017) To understand the process of demonetization in India and its influence in cashless transaction Research paper is purely based on Secondary data, the data was gathered from websites, books and research papers. Mr. Sharif Mohd. (2016) What is the necessity of Demonetization and how it will change Indian Economic System?

What will be the positive and negative outcomes from demonetization The data is collected from secondary sources

PK Pandia (2017) To Analyze the Impact of demonetization on black money, corruption, and fake currency. Secondary data collection method was used to gathered information Himanshu Kushwaha, Ashwani Kumar, Zainab Abbas (2018) To perceive significance and purpose of demonetization. What is the impact of demonetization on different sector of economy The study is based on secondary data which was composed from observation and documentary analysis and necessary data was gathered from publications, websites, and journals

Dr. Pratap Singh & Virendra Singh (2016) To understand the consequences of demonetization on different economic variables and entities The research paper is mainly based on secondary data. For analysing data Graph and percentile method were used. Ms. Yashna Samuel & Prof. Anoop K. Saxena (2017) To study the long term and short term impact of demonetization on different segment of Indian Economy Desk research method is used with the help of secondary data.

How Was the Research Method Applied?

According to the research paper, the researcher used Diagnostic, Analytical and secondary data which was gathered from governments currently growth assessments. This data helped researcher to compare with previous year data and to discover, whether it is impact on Indian economy or not. To find exact impact on economy, the researcher divided the economy in to different sector. In this research paper, the researcher used two various hypotheses which are listed below.

According to the above table shows that, Trade, Hotel, Transport & Defence, Public Administration indicates that, there is a positive growth as compare to previous half year. So that there is strongly impact of Agriculture on Gross Value Added. Construction, Manufacturing, Electricity, Gas, Water Supply & other utility indicates that there is no major difference on impact of demonetization.

Though, Real Estate and Professional Services indicates that, there is a negative growth as compare to previous half year. So that there is negative impact on Professional Services and Real Estate. However, there are some ups and downs in different sectors of Indian Economy, but these are not crucially impacted on Indian Economy. below analysis has proved the hypothesis.

The above table describes the paired sample t- test of Gross Value Added for H1 & H2 of main contributing sectors of Indian Economy. The paired difference describes that, there is no significant difference between the samples and the mean value is -113.625. the significance value (0.709) is bigger than the p- value (0.05). so that the null hypothesis is accepted. It showed that, there is no significant difference between two hypothesis H1 & H2.


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