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 BUSINESS ADMINISTRATION – IMBA)
Under Gujarat Technological University
UNDER THE GUIDANCE OF FACULTY GUIDE - PROF. BHAVIK TANK
Submitted by KRISHNAPALSINH INDRAJITSINH VIRPARA
Enrollment No.: 147290585054 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. i nvestigations.
Name & Signature of faculty guide Prof. Bhavik Tank
Date of Submission 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 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 dir ection 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. r eport.
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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
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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 IV.10
Local tax payment Real estate
47 48
IV.11
Fake Currency
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
48
Annexure References
99 101
7
LIST OF TABLES Table No.
Particulars
1
Bank notes in circulation
13
2
Changes in Major Assets and Liabilities of SCBs
32
3
PMJDY: Number of Accounts
36
4
Growth in Select Electronic Modes of Payments
38
5
Gold Imports
41
6
GDP Forecasting by various agencies
50
8
Page No.
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 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. necessary. Maintaining control control and accountability accountability of cash transactions 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.
10
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 the transactions of the business business and monetary 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 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 transactions are the referred referred as the payments payments for crime, corruption, bribe, human trafficking or other unlawful activities.
Cash is stored in the value 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 that includes all the jobs which are not recognized as normal income sources, and on which taxes are not paid.
11
Income earned earned by exchange exchange of cash cash is neither taxed nor monitored by government as its contribution to the economy is negligible.
4. Accounted transactions:
These transactions transactions are the business business proceedings 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 exchange is cash for these transactions transactions which demand for money
Store of value 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 and allied sectors like forestry, animal husbandry, fishing and horticulture 2. The Industrial (or manufacturing) manufacturing) sector is classified classified into micro, small, 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.
12
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
11,626
45
(12.9)
(0.3)
32,015
320
(35.5)
(1.9)
4,924
98
(5.4)
(0.6)
3,890
194
(4.3)
(1.2)
15,778
1,578
(17.5)
(9.6)
15,707
7,854
(17.4)
(47.8)
6,326
6,326
(7.0)
(38.6)
90,266
16,415
2 and 5
10
20
50
100
500
1000
Total
Note: Figures in parentheses represent the percentage share in total.
13
CHAPTER II INTRODUCTION TO DEMONETIZATION
14
II DEMONETIZATION:
Coins and Banknotes may cease to be “l egal if new notes of the same egal tender ” ” if currency replace them or if a new currency is introduced replacing the former one. Legal tender is a medium of payment pay ment 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 combat corruption and crime crime (counterfeiting, tax evasion). evasion). 3. To discourage discourage a cash-dependent cash-dependent economy. economy. 4. To facilitate trade.
15
II.1 DEMONETIZATION GLOBALLY II.1.1 REPUBLIC OF IRELAND:
According to the Economic 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.
16
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 woul d 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
18
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 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 i n 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 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.
19
III.2 PURPOSE OF DEMONETIZATION: After the PM Modi’s announcement 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 economy to formal formal economy. economy.
Encourage deposit base and Savings
For cashless society
For cracking cracking down the fake currency notes (counterfeit notes)
To give boost to white economy. economy.
20
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 week cash withdrawal limits were increased to 24,000 24,000 Rupees from 14th November, 2016.
Cash withdrawal withdrawal limit from Automated Teller Machine 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 16 th 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 i ssued 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.
22
III.4 CONTROVERSIES CONTROVERSIES OVER DEMONETIZATION
III.4.1 LEAKAGE OF INFORMATION IN ADVANCE:
Before 15 days of the official announcem announcement ent 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 chairman of the State 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 Communist Party of India India (Marxist) (CPI-M) alleged 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, Kejriwal, leader of Aam Aadmi Party Party also also claimed 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 (Chief Minister of Bihar), Bihar), Rahul Gandhi 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.
24
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: DEMONETIZATION:
The President President of the Union of India, Shri Shri Pranab 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 (JSW Group), Kunal Bahl (Snapdeal and FreeCharge) also supported the move adding that it would also accelerate e-commerce.
Infosys founder N. R. R. Narayana Murthy praised the move.
Finance Minister Arun Minister Arun Jaitley 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) (GST) as "an attempt to change the spending habit and lifestyle of the citizens”.
The Indian National National Congress spokesperson spokesperson Randeep Surjewala Surjewala welcomed the move but remained doubtful on the after effect & consequences that would follow.
The demonetisation demonetisation also got support support from Chief Minister of Andhra Andhra Pradesh Nara Chandrababu Naidu & Chief Minister of Bihar Nitish Kumar.
Former Chief Chief Election Commissioner of India India S. Y. Y. Quraishi said with the hopes that demonetization demonetization could lead to long l ong term electoral reforms as most of the unaccounted money is used in elections.
25
Social activist activist Anna 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 Monetary Fund (IMF) issued issued a statement supporting supporting the Indian PM Modi's great efforts to fight against corruption by the announcing demonetization policy.
Former Prime Minister of Finland 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 Ba nk Note Switch
Appears To Be Working W orking – $30 Billion in Rupees deposited i n 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, Independent, a Singapore-based Singapore-based paper published a glowing glowing article 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 i n India. It will be reflected in i n the legacy of this Prime Minister,” the article said.
26
III.5.2 CRITISM OF DEMONETIZATION:
Amartya Sen, Nobel Nobel laureate Indian economist, severely severely criticized criticized the the demonetization move calling it a “despotic “ despotic action” among other things.
Kaushik Basu, Basu, Former Senior Vice-President Vice-President and Chief Economist 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 and Planning Planning Commission 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, Patnaik, a former former professor professor of economics economics at the Jawaharlal Nehru University, Delhi called the move 'witless' and 'anti-people'. He criticized the simple way in which bla ck 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 common people.”
Noted economist economist and journalist, 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 Rajiv Bajaj 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 Seeni Ahamed, Ahamed, General Secretary of the Indian National League, to 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 also filed in the Supreme Supreme Court of India. Supreme 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 Congress-led opposition, which includes 13 political parties, 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 Rajya Sabha on 16th 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 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 second and third third day of the Winter Session Session of Parliament, 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 day RBI RBI brings out 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 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 Indian National Congress spokesperson spokesperson Randeep Surjewala 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 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 1.
Aggregate Deposits
2.
Borrowings
Assets 5,549
1.
Bank Credit
1,008
(-56)
2.
Investment in
4,560
Government Government Securities 3. Total
5,493
Net Other Assets
Total
Note: Data are provisional. Source: RBI
33
(-75) 5,493
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, 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 post-demonetization period. Debt oriented mutual funds and insurance companies 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 Variati on
2016 Rural Public Sector Banks
114.3
(01-03-2017
over 09-11-2016) Urban
Total
89.3
203.6
Rural 122.1
Urban 100.8
Total 222.9
Rural
Urban
Total
7.8
11.5
19.3
(6.8)
(12.9)
(9.5)
2.9
0.4
3.3
(7.8)
(6.8)
(7.7)
0.1
0.5
0.6
(1.3)
(16.8)
(7.0)
10.8
12.5
23.3
(6.9)
(12.7)
(9.1)
Regional Rural Banks
Private Sector Banks
Scheduled Commercial Banks
37.1
5.3
156.7
6.0
3.1
98.4
43.1
40.0
8.4
255.1
5.4
167.5
Note: Figures in parentheses are percentage variations. Source: Pradhan Mantri Jan Dhan Yojana website.
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6.4
3.6
110.9
46.4
9.0
278.4
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 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. payments. After the announcement 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 NEFT
CTS
IMPS
NACH
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Volume
16.2
23.3
39.0
38.0
34.5
Value
37.6
38.3
40.8
60.2
49.5
Volume
-1.1
23.0
58.4
52.7
20.2
Value
2.9
8.6
13.0
19.3
0.8
Volume
116.7
89.6
157.2
177.7
150.4
Value
150.7
135.9
186.6
196.7
184.2
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 E lectronic Payment Systems - R epresentative Data
Glossary: 1. National electronic funds transfer transfer (NEFT) (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 Truncation System 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 House (NACH) (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 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 a nd 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 f or 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 i mpacted gold demand. Table 5 : Gold Imports Month
Value
Volume
Value
Volume
(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
1
26.8
March
*: Estimated. Source: DGCI&S.
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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 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 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 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 sinc e 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.
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IV.5 HAWALA TRADING:
Demonetization has impacted an unprecedented hit on the hawala trading. After demonetization, demonetization, Hawala operators in India, Pakistan & Dubai say that only 35% of the trade is functioning. According to the media reports during the initial period of demonetization, 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 1520 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 35% 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. minimum.
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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 ri d 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.
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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 i n Gujarat has risen almost sixfold 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 ₹13
crore tax those of Surat collected ₹43.8 crore, Rajkot and Vadodara got
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 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 fa ke 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.
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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 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 BofA-M L 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. Agency
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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 5th 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. effi cient. 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 53
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 r esolved”” 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 main reason behind the generation of black money money is the Indian Political System that is the Indian government just focused on making committees rather than to implement i mplement 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
ail if they play demonetization’. Government can play all these moves and still f ail improperly. All we can say is that Government is playing well. But will it 55
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 56
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 data such as previous research 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 gain the knowledge about the whole demonetization move in India. India.
To understand its impact on the Indian economy. economy.
To understand understand the changes in government government policies to to promote promote digital modes of payment.
To understand understand the benefits to the government by the demonetization.
To understand the preferences preferences and opinions of general public over 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 Engli sh lays down the meaning of research as “a careful investigation or inquiry specially
through search for new fac ts in any branch of knowledge.” Redman and Mory define research as a “system “ systematized atized 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 ter m should be used in a technical sense. According to Clifford Woody research comprises defining and redefining redefini ng 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 t heory 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 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 di scovered 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 phenomenon or to achieve 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 with which something something occurs or with 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 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 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 63
fundamental research. Similarly, research studies, concerning human behavior carried on with a view to make generalizations about human behavior, are also examples 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 64
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 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 t o 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: 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 fieldsetting 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 t o 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 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 r esearch 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 t hesis 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, proceedings, government 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 i n 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 nonprobability samples. With probability samples each element has a known probability of being included in the sample but the nonprobability 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. 75
8. Analysis of data:
After the data have been collected, the t he researcher r esearcher 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 t he report or o r the thesis: t hesis:
Finally, the researcher has to prepare the report of what has been do ne 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. 76
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 t ables and list of graphs and chart s, 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, r eport, 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
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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 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-econom anti- economy y 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 personal/professional crises due to severe cash shortage?
49%
Yes No
51%
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
None of the above
28%
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 di fficult 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 difficult to be use or to get its change. 49% respondents 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.
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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 planning
No
When it asked about their opinion over the objective of demonetization to fight against black money. 42% respondents agreed about the t he 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.
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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
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Results and findings of the primary data research is that almost 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 tackling and removing the 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 payment modes and make cashless society.
Still there is a threat of fake currency currency in the new currency currency notes as well as the most of the people are not aware about the security features of the new notes, there are chances chances of the use of new fake currency notes with the person person who is not fully fully aware about the new new note.
Most of the respondents agreed and admired the demonetization 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.
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CHAPTER IX LIMITATIONS OF THE STUDY
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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 demonetization on the foreign trade as in ImportImport-Export Export of the country is not studied in this project report.
The data interpreted was was based based on the sample sample size of 100 100 respondents 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.
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CHAPTER X CONCLUSION OF THE STUDY
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Overall, the assessment assessment is that the the impact impact of demonetization in India has been transient, given the information so far.
The analysis analysis in this paper suggests that demonetization demonetization impacted various sectors of the economy and on individual lives as well..
However, the adverse impact, in general, general, was short-term as it was felt mainly in November November and December 2016.
The impact impact moderated moderated significantly significantly in January January and and dissipated dissipated by and large by mid-February 2017, reflecting an accelerated pace of remonetisation.
Though the impact on GDP growth was 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 cost CASA CASA deposits deposits by banks is expected to have increased banks’ net interest income i ncome.
Jan-Dhan accounts increased by 23.3 million million post demonetization, while deposits under Jan-Dhan accounts increased by Rs. 187 billion (41 per cent).
Imports of gold increased sharply sharply in November, but moderated moderated in December.
There has been been a significant significant improvement improvement in the use of digital modes of payments post demonetization, although their base is still small.
Overall, demonetization demonetization has some negative impact, impact, which, which, however, 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.
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ANNEXURE
QUESTIONNAIRE: This questionnaire is part of an educational research on t he impact of demonetization at micro 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 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 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 ATMs/Banks in your locality locality being regularly regularly supplied supplied with cash?
Yes
No
Don’t know
7. Are you finding finding it difficult to use 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 but needs much better planning
No
10. Demonetization 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
REFERENCES
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