Table of ContentsImpact of Demonetization on BusinessImpact of Demonetization on GovernmentImpact of Demonetization on SocietyObservationDemonetization is an act of stripping a current monetary unit of its legal status. The policy of demonetization occurs whenever a country changes its national currency. Sometimes a country completely replaces the old currency with the new one. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Demonetization is undertaken by different countries at different times for a number of reasons: To combat economic inflation To combat corruption in the country like tax evasionsTo combat black money circulating in the countryTo increase cash liquidity in the country.In 2016, on November 7, the Indian government adopted the demonetization policy for the third time in the country. Before 2016, the Indian government adopted the policy of demonetization in 1946 and 1978. Adopted on November 7, 2016. Indian Prime Minister Mr. Narendra Modi announced that from the next day i.e. November 8 , legal tender would be ₹500, ₹1000 note. is invalid. He also announced that a new note of ₹500 and ₹2,000 would be announced soon. The Reserve Bank of India has also notified that invalid notes could be deposited in banks till December 30, 2016. Citizens can exchange their notes in banks, but the exchange limit will be different from time to time. Earlier it was ₹4,000 per person and then it was increased to ₹4,500 but later it was reduced to ₹2,000 per person due to lack of cash flow. At that time, the Reserve Bank of India also set a term limit for personal bank withdrawals. accounts. The Reserve Bank has limited the withdrawal limit to ₹10,000 per day and ₹20,000 per week. Later, this amount was increased to ₹24,000. The Central Bank also imposed a restriction on the ATM withdrawal limit. It was limited to between ₹2,000 and ₹2,500 at different places. Later in January 2017, it was increased to ₹4,500 and in mid-January, it was increased to ₹10,000. Objectives In a long speech, Prime Minister Narendra Modi announced demonetization of notes from ₹500 to ₹1,000. Behind the demonetization of old currency notes, the Prime Minister mentioned various reasons to be discussed. Here we mention some reasons which will be discussed later: Black Money: During his speech, Narendra Modi mentioned that the main reason for demonetization of old currency notes was to recover black money in India. Various studies have shown that black money accounts for about 25% of India's GDP, which is about 37 lacs Crore, and black cash economy accounts for about 10% of the black economy, which is about 3.79 lacs Crore. To reduce cash transactions: One of the reasons mentioned by the Prime Minister in his demonetization speech was to reduce cash transactions in the country. Cash transactions end up increasing corruption in the system. The government's goal was to break corruption within the government system. Eliminate Fake Currency: Fake currency is one of the major problems in the Indian economy. According to former Finance Minister P. Chidambaram, there are no exact amounts or estimates of the circulation of counterfeit currencies in the Indian economy. This fake currency has been used by terrorists and other anti-social groups to create nuisance within the country or terrorism within the country. To move fromhigh monetary economy to digital monetary economy: According to the current Finance Minister Mr. Arun Jaitley, another The main objective of demonetization was to move from high liquidity monetary economy to digital space . The main reason to move from this to that is that the government can track every transaction that would be done by the digital wallet, net banking, etc. so that there are fewer errors in the transaction. Conversion of non-formal economy to formal economy: OtherThe objective of demonetization was to convert the non-formal economy into a centralized formal economy where the government can get the data of every person. When the Indian government made a surprise announcement of demonetization, it caused a huge shock among citizens. ₹500 and ₹1,000 notes were withdrawn from circulation as legal tender. The main mission of Prime Minister Narendra Modi was:Eliminating tax evasion.Explicit war against black money.Eliminating currency fraud and financing of terrorism.Prime Minister or Government of India mainly focused on the agenda of black money.Impact of demonetization on business, trade and enterprise. are the backbone of the economy, we need to determine the impact of demonetization on businesses and assess the impact on different sectors. It has been observed that small businesses are mainly affected across all sectors as these are heavily focused on cash transactions. we found that over a shorter period, some cash-powered factories are unable to fulfill their daily requirements such as paying workers' daily wages and purchasing raw materials, as they are not able to withdraw money from banks. As we mentioned earlier, there were regulatory reasons for withdrawing money from the bank. From actual observations, we found that demonetization includes the retail sector, followed by agriculture, real estate construction, media and entertainment tourism, as well as labor-intensive sectors. 'artwork. There are a lot of cash transactions in daily life, the impact is comparatively higher on small traders and unorganized retail segment. Agriculture – Agriculture has been mainly affected because sales, transportation and distribution of Reddy products to wholesale centers are mainly cash dependent. But due to regulations, cash transactions have been restricted, marginal farmers who sell their produce daily to wholesale mandi or vegetable markets and directly to consumers have been more affected. Real Estate – One of the other sectors that was hit for demonetization was the real estate segment. Because real estate activities mainly depend on cash. Like other small traders, small real estate developers are severely affected due to very high involvement of cash transactions as an element of payment in real estate transactions, payment of daily wages of workers and raw materials. Construction - The construction sector has been severely affected due to lower collections in the form of advances from clients in a project in the early stages of construction, as these mainly depend on the progress of construction and the policy of in-depth demonetization of services has infected the fate of unskilled labor which was a daily wage that pays workers and absorbs maximum unskilled labor after the agricultural sector. 20Workers mainly work on a daily wage basis in the country's construction activities. Due to the restriction on filing the money withdrawal order, they were unable to pay the workers and left their jobs. Tourism and Hospitality – One of the major sectors affected by demonetization was the tourism and hospitality sector. Because people cannot spend on tourism due to lack of currency, the tourism industries offered at this time and the unorganized inventory of hotels are mainly affected. For this, restaurant businesses were facing slowdown in business and growth due to lack of liquidity availability as restaurants generally rely heavily on cash spending. Labor-intensive sectors - Labor-intensive sectors like leather mining and textile industries require huge sums of money to be paid in cash to daily wage workers, but due of the demonetization policy and restriction of cash transactions, the impact on labor-intensive sectors was very high. due to the restriction of daily or weekly transactions, the impact on the weekly payment of contract workers is limited, it is the workers in the textile or mining industry who are most affected. Due to the availability of liquidity, the supply and production of textile industries were negatively influenced, which directly affected the economic growth of the country for some time. Automobile – The automobile industry was another major sector that was affected due to demonetization. from the Government of India, as a significant drop in the demand for two-wheelers has been observed compared to other four-wheeler luxury cars, as two-wheelers are cheaper than other four-wheeler or luxury cars. It has been observed that different card dealers have reported some decline in sales. And the repair industry which was attached or related to the automobile industry has been affected due to unavailability of cash as reimbursement of automobiles mainly depends on cash transactions rather than digital or digital transactions. credit. The Impact of Demonetization on Government another wing where we observed the impact of demonetization adopted by the Government of India on November 7, 2016. In June 2016, the Government of India adopted a new income reporting system which was in force until September 30, 2016, a precursor to demonetization. Government of India gives a fair chance to Indian citizens to provide information about their black money and undeclared assets to avoid disputes and show clear pictures in declaring their undeclared income on registered properties and assets by paying tax and penalty for tax evasion. The announcement of demonetization marked the beginning of a new era in the government or the entire Indian economy, which has been making valiant efforts to free itself from fake black money and corruption within of the country and the government system. We will discuss some of the things we have observed that are having late impact within the government and the system. Black Money and Corruption – After the announcement of demonetization we can see the immediate effect of black money and deposited amount in the form of canceled legal tender of 500 rupees 1000 notes. As per the various reports, around 12 lakh crore rupees are deposited in different commercial banks, but it has been estimated that lakh crore will be deposited in the bank, so seeing thedata, it is believed that around 1.5 to 2 lakh crore may be of black income. Elections – We also saw that this demonetization came as a shock to the political parties in the Uttar Pradesh and Punjab elections. Political parties were helpless due to low liquidity availability and UN-declared cash withdrawals which were used to attract voters. Due to this situation, the outcome of the upcoming elections should be transparent to some extent. Digital Payments – Due to the demonetization move by the government and low availability of cash, this is leading to the use of digital payments. at that time. We show that different e-wallet services such as Paytm Mobikwik, oxygen wallet and other digital wallet services have been affected in this era of demonetization. through these digital transactions, the money will be channeled to a centralized system which will be a responsible generic tax and contribute to the development of the country's economy. Counterfeit Currency – Prime Minister Narendra Modi has repeatedly mentioned that the objective of demonetization is to combat counterfeit currency this type of counterfeit currency has been used in different anti-social nuisance and terrorism activities in the country. It was a good initiative to defeat the Counterfeit Money Syndicate, but why were we observed after this new 200 rupee note was officially put into circulation in the economic system?Several cases were reported in the media or in the written press concerning fake currencies. GDP - Supported by available data from the Central Bureau of Statistics, Government of India, the Indian economy is expected to grow at the rate of 7.1% during the financial year taking into account the impact of demonetization, but in In reality, this did not harm growth for the financial year. During this period, it was observed that the GDP was between 6.9 and 7%, this data gives the central government rate to defend the decision of scrapping old 500 and 1000 rupee notes. Low inflation - As you observed that black money has flowed out of the system, the money supply has decreased to some extent and the purchasing power of the people has decreased in the country with In this situation, the rate of inflation was reduced. Impact of Demonetization on Society The news about demonetization was released suddenly and the common man was affected the most. Show the effect on the wedding ceremony which was planned at that time, families were facing problems with cash transactions in weddings at that time. To get the cash, the family where the wedding is taking place has to present the invitation card to withdraw 250,000 and above for the wedding expenses, this cost creates problems and hassles within the families. We saw minimal impact on the education sector as they had been asked to enable online transactions on their website for fees and other online payments for the convenience of students and parents, but much black money has been recovered thanks to the different educational systems. institutions during a raid by the Income Tax Department which was received in the form of donations from students. Common people like salaried people faced huge problems and hassles during the time of demonetizations because on the opening day of the month the salary is better credited to the bank but they could not withdraw more than 2,500 rupees at ATMs. it was observed in various parts of the country that many employees went to the bank branch and withdrew the entire.