LITERATURE REVIEW

1. Kushwaha Himanshu, Kumar Ashwani and Abbas Zainab (2018) defines various concept of Demonetisation. The various reason of Demonetisation has been identified in the study are black money, to hit the fake money racket, Online transaction frauds, to hit the maoist and rise in GDP. The various positive as well as negative effect of Demonetisation are identified and studied. The various sectoral impacts (Real Estate, Gems and Jwellery, Banks, Retail and agriculture) are studied.

2. Maken Pooja and Dr. Shekhar Shashi (2017) may study about India’s Demonetisation. They study its impact on various countries economy in past years. The positive and negative impact and sectoral impact are seen the various sectors which are taken into account over black money and fake currency, banking sector, online transaction, lending rate real estate cleansing and retail market. The findings of the study are the GDP of our country decreases from 7.8% to 7.1%. Informal sector is in worst condition. It encourages cashless transaction. Black money removed from the economy, therefore growth and development of the economy takes places.

3. Kumar Kveera (June 2019) studied the impact of Demonetisation on people, demographic profile of people. It also describes various concept of Demonetisation. Demonetisation of highest denomination takes place by the government of the country, which is the biggest shock to the Indian Economy. The findings are alternative payment mode such as E-wallet, Online Transaction, E-Banking, Debit and Credit Card usage has been increased, and this will shift on efficient cashless economy. The various illegal transactions have been stopped due to the act of Demonetisation.

4. Dhara K Abhani (2017) studied to check customer awareness about online banking. Study people’s attitude for keeping the money either at home or at bank. To identify those account which are highly affected by Demonetisation. The recent Demonetisation has proven more successful compare to the previous two Demonetisation. People become more aware and conscious about online banking. The tool of the Demonetisation is fruitful create fear in the mind of black money holder.

5. Dr. Singh Ombir (2017) study deals with Demonetisation and Digitalization of India. It leads to formalization of economy especially BHIM Application. The high currency note Demonetized which impact the various illegal transactions. Many business of rural as well as urban area get affected because the neither pay tax nor registered. They are considered as unorganized sector of the economy. The major part of economy is massed with unorganized sector. Digitalization plays a vital role to erode black money or illegal transactions. The government of our country making an effort to make the major part of the economy cashless.

INTRODUCTION:

Demonitization is an act of banning and replacing the currency of the country. There are many reasons due to which government perform the act of demonitization. The reasons are hawala transaction, tax evasion, black money hoarding, elimination of counterfeit, elimination of terror funding or damage currency notes. Basically, the focus in on high denomination currency, when the government ban any currency, its value becomes zero or nil. The currency is converted into paper. The same denomination or different denomination currency is issued in circulation to remove the problem of cash.

In our developing country India, demonitization takes place three times to control the above-mentioned causes. The last Demonitization takes place in 8 November 2016, the Government of India declare to demonitised the denomination of Rs. 500 and Rs. 1000 note, without any prior intimation or declaration in the midnight. The currency note of Rs. 500 and Rs. 1000 is of Mahatma Gandhi series. These two currencies were replaced by Rs. 500 and Rs. 2000 bank notes. In year 2018, 99.3% demonitised banknotes were deposited to the bank and comes into the economy.

MEANING OF DEMONETISATION:

The demonitization is an act performed by the Government of the country. It is the major function of bank and replacement of the banknote. The following is a diagrammatic representation of it:

Old currency or Bank Note Banned

Demonetisation

Replaced with new currency of same or different denomination

The process of replacement of old currency with new currency is known as demonetisation. The currency of same denomination or some other denomination is issued in circulation in our economy. When the old currency or note demonitised its value becomes zero and government take those old note back.

Demonetisation is a legal act or step taken by the government to combat all the illegal activities carried out in the economy.

RESEARCH METHODOLOGY:

Research design of this paper is descriptive in nature. The concept, causes and reason of demonetisation are studied and analysed. The study is focuses on both the long term positive and short-term negative effects of demonetisation. The data is collected from secondary sources. The secondary data is collected from various article, research papers, books, Magazine and internet etc.

OBJECTIVES OF THE RESEARCH:

1. To study the concept and identify various reasons of demonetisation.

2. To study both the positive and negative effect of demonetisation.

3. To study and analyse the effects of demonetisation to the economy.

LIMITATIONS OF THE STUDY:

1. This research paper/study is based on only secondary data.

2. This study focuses on the effect of demonetisation in Chhattisgarh.

3. The reasons and causes in the study are limited.

POSITIVE EFFECTS OF DEMONETISATION:

1. Elimination of Black Money:

The first and major impact of demonetisation put on removal of black money to some extent. The monetary transactions of the unorganized sector who’s record is not maintained by the government and who do not pay taxes is considered as illegal transaction and due to this deposition of black money occurs. When the higher denomination currency note was banned black money come to the circulation in the market or in the economy. Due to this the shortage of cash decreased to some extinct.

2. Increase in Investment Level:

After demonetisation all the money is deposited in bank accounts of customer. The bank pay very low interest rate. This lead to the shift in the investment habit from bank to the various alternatives like mutual funds, share market which yield the high rate of interest. Due to the high investment of investors, leads to the capital formation of business. More and more business are established which increases employment and income of citizen of India, bring the positive change in the economy.

3. Tax evasion is reduced:

All the black money is converted to the white money. The record of all the money is in the hand of government, so the chance of tax evasion is decreased to some extinct. By this act the revenue of the government is increased leads to the development of all sectors of the economy.

4. Terror funding is decreased:

The culprits of our country are terrorist and maoist involves in the illegal activities in the society and harms the society directly and indirectly. The major part of black money is in the hand of these terrorist or different agencies. By performing demonetisation the black money is decrease as a result of which terror funding is decreased or stopped.

5. Paper money is converted to digital money:

By performing the act of demonetisation, the habit of consumer cash payment for every transaction shifted to online payment. So the unnecessary wastage of paper currency and shortage of currency decreases. Every consumer now put debit or credit card for payment in a electronic mode takes place easily within a few second.

NEGATIVE EFFECT OF DEMONETISATION:

1. Slowdown of every business:

Initially when demonetisation takes place, the economy faces the shortage of cash, due to this every individual do not have cash to purchase the basic necessity product and sale of every business decline rapidly which overall influence our economy as a whole. Our economy is directly or indirectly made up of various sectors of business. If business faces the slowdown stage than our economy also faces decreasing trend.

2. Shortage of cash money:

Demonetisation makes the value of currency zero and replacement of currency took a time to come back in the economy. In this period of time a very panic stage of cash occur where basic need purchasing cash is not available. The society and their various social events like marriage faces a horrible to get performed till the proper flow of new currency not occur; it puts a very adverse effect on business, customer and our economy. The economy becomes constant at that time period.

3. Banking employee’s workload increases:

As the overall economy, money supply is regulated and controlled by RBI (Reserve Bank of India). RBI is known as banker’s bank, under which many public as well as private sector banks run. The liquidity of the market or economy is decreased or increased as per the requirement by the various instrument of monetary policy. When demonetisation occur, all the banned note which are reside with the customers are exchanged by the bank. So the lengthy ques are made in bank and its employee faces a work pressure.

4. Stagnation of Economy:

Due to the down trend of Economy it put a ripple effect in the entire sector. Every business sales and profit decreases as a result of which, many people become jobless, rate of unemployment increases. As a result of it income of people decreases and GDP rate of the economy becomes less. All the parameters such as income falls, poverty increase, unemployment increase, GDP Falls and crime rate increase puts a negative effect.

5. Crime Rate increases:

As the scarcity of cash occur and people are unable to fulfil the basic requirement of life. To fulfill the basic requirement of the crime rate increases.

FINDINGS OF THE STUDY:

1. The short-term effect of demonetisation is negative.

2. All the parameters like Income, GDP, Employment, Shortage of cash etc.

3. The long-term effect of demonetisationis positive in our economy.

4. The positive effects are elimination of black money, investment level increases, tax evasion is reduced, terror funding decreases and digital transaction increases.

CONCLUSION:

Demonetisation is a deliberate attempt taken by the government of our country. There are various effects this act put in our country. The short-term effect is negative and the long-term effect is positive. In our country India, demonetisation takes place three times after a definite interval of time. But the main objective behind every demonetisation is more or less similar i.e. to stop many illegal activities which are carried out in our economy. Generally highest denomination currency is demonitised so that the black money comes into the circulation. Demonetisation is simply an act of replacement of currency with the new currency. The last demonetisation takes place in 8^th November 2016 in which the 500 Rupee and 1000 Rupee note is demonitised and it replaces with 500 Rupee and 2000 Rupee note.

REFERENCE:

1. Kushwaha Himanshu, Kumar Ashwani and Abbas Zainab April (2018) “Impact of demonetisation on Indian economy: A critical study” Vol – 5 (International journal of Management studies)

2. Singh Charan March (2018) “India since demonetisation” IIMB-WP no. 567

3. Swami Akhil and Jain Isha October (2017) “A study on the impact of demonetisation on various class of the society.”

4. Dr. Mohsen farhat and Sahni Stuti May (2017) “Demonetisation: A ripple effect on Indian Economy” IRA (International Journal of Management and Social Science.

5. All Websites

Received on 23.01.2020 Modified on 12.02.2020

Int. J. Rev. and Res. Social Sci. 2020; 8(1):31-33.

DOI: 10.5958/2454-2687.2020.00007.6