Author : Sahil Rasal
MMS
Roll No : 48
DEMONETISATION IN INDIA
1. Demonetization and digital payments in India: perception and reality.
Chakrabarty, Manisha et al (2023) state that the demonetization of certain banknotes in India in 2016 was a significant event in the country’s economic history. One of the major objectives of this initiative was to promote the use of digital payments and reduce the country’s dependence on cash transactions. The perception of demonetization and digital payments in India is a mixed bag. While some people believe that it has been successful in promoting digital payments and reducing corruption, others have criticized it for causing economic disruption and hardships, particularly for the poor and those in rural areas who may not have access to digital payment infrastructure.
2. Cash and the Economy: Evidence from India’s Demonetization.
Chodorow-Reich, Gabriel et al (2023) state that in November 2016, the Indian government announced the demonetization of certain banknotes in an effort to reduce corruption and promote a shift towards digital payments. This move had significant impacts on the country’s economy, particularly with regards to cash usage. Research on the effects of demonetization on India’s economy has produced mixed results. On the one hand, some studies suggest that demonetization led to a decline in economic activity and slowed GDP growth. It also resulted in significant hardships for people who relied on cash for their daily transactions, particularly those in rural areas with limited access to digital payment infrastructure.
3. Demonetization of High Denomination Currency Notes in India and its Impact on
Insurance Sector.
Murarka, Tina (2023) says that the demonetization of high denomination currency notes in India in 2016 had a significant impact on various sectors, including the insurance sector. One of the immediate impacts was a temporary slowdown in premium collections for insurance companies, as many people were focused on exchanging or depositing their old banknotes instead of paying insurance premiums. However, this slowdown was short-lived, and premium collections quickly bounced back in the following months. Another impact of demonetization on the insurance sector was a shift towards digital payment methods, such as online payments and mobile wallets.
4. Demonetization in India – A STUDY OF INTENT, AGENDA, AND IMPACT ON INDIAN ECONOMY.
Sharma, Jitender (2023) says that demonetization is a process of withdrawing a specific currency note from circulation and replacing it with a new one. In India, in November 2016, the government announced the demonetization of high-denomination currency notes, which had a significant impact on the country’s economy. The impact of demonetization on the Indian economy was mixed. While it did lead to an increase in digital payment usage and financial inclusion, it also resulted in a temporary slowdown in economic growth and a decline in consumer spending. Many small and medium-sized businesses were adversely affected, and the agricultural sector suffered due to a shortage of cash.
5. Innovation for Survival: Entrepreneurial Response of Indian MSMEs to Demonetization.
Sharma, Nomita (2023) says that the demonetization of high-denomination currency notes in India in November 2016 had a significant impact on the country’s micro, small, and medium enterprises (MSMEs). In response, many MSMEs took innovative steps to adapt to the new economic environment. Some MSMEs shifted towards digital payments, adopting mobile wallets and other digital payment methods. Others explored alternative sources of financing, such as crowdfunding and peer-to-peer lending. Some MSMEs also focused on increasing their export business to offset the decline in domestic sales.
Entrepreneurship played a critical role in enabling MSMEs to survive and thrive in the aftermath of demonetization.
6. Demonetization Impeded Indian Economic Growth? Test of Hawtrey’s Theory of
Business Cycles.
Arora, Nitin et al (2023) state that the impact of demonetization on Indian economic growth and tests the validity of Hawtrey’s theory of business cycles in this context. The results of the study suggest that demonetization did impede Indian economic growth and that Hawtrey’s theory provides a useful framework for understanding the dynamics of the Indian economy during this period. Hawtrey’s theory posits that business cycles are driven by fluctuations in the money supply, with expansions leading to booms and contractions leading to recessions. The demonetization of high-denomination currency notes in India in November 2016 led to a contraction in the money supply, which, according to Hawtrey’s theory, should have resulted in a recession.
7. The Impact of Demonetization on the Impulse Buying Behavior of FMCG Consumers.
Pandya, Prashant Ravindrakumar et al (2023) says that the impact of demonetization on the impulse buying behavior of consumers in the fast-moving consumer goods (FMCG) sector in India. The results of the study suggest that demonetization had a significant impact on impulse buying behavior. The demonetization of high-denomination currency notes in November 2016 led to a shortage of cash in circulation, which affected the purchasing power of consumers. This, in turn, led to a decline in impulse buying behavior, as consumers became more cautious in their spending. The study found that the decline in impulse buying behavior was more pronounced in the case of non-essential FMCG products, such as cosmetics and personal care items. Consumers were more likely to defer purchases of these products until they had access to sufficient cash. The impact of demonetization on impulse buying behavior varied across different demographic groups.
8. Progress in Digital Banking After Demonetization: Some Evidence.
Bansal, Nitin et al (2023) state that the progress made in digital banking in India following the demonetization of high-denomination currency notes in November 2016. The results of the study suggest that demonetization played a significant role in driving the adoption of digital banking in the country. The shortage of cash in circulation following demonetization led to a significant increase in the use of digital payment methods, such as mobile wallets, online banking, and debit/credit cards. This trend continued even after the availability of cash improved, indicating a sustained shift towards digital banking. The study also found that the adoption of digital banking was more pronounced among younger consumers and those with higher levels of education and income. These consumers were more likely to have access to digital infrastructure and to be comfortable with using digital payment methods.
9. A STUDY OF THE EFFECT OF DEMONETIZATION ON INDIAN ECONOMY.
Kapoor, B et al (2023) says that the Indian economy, with a focus on the short-term impact on key macroeconomic indicators such as GDP, inflation, and unemployment. The results of the study suggest that demonetization had a significant negative impact on the Indian economy in the short term. GDP growth slowed significantly in the quarter following demonetization, with a decline of 1.5 percentage points. This was largely due to a slowdown in the manufacturing and services sectors, which were hit hard by the cash crunch. Inflation also declined in the short term, due to a decrease in demand for goods and services, as consumers were unable to access sufficient cash. Demonetization had a significant negative impact on the Indian economy in the short term. While some of the negative effects have since been mitigated, the study highlights the importance of carefully considering the potential impacts of economic policies such as demonetization on key macroeconomic indicators, as well as on different sectors of the economy and different demographic groups.
10. Demonetization as a Trigger of Customer Adoption of Mobile Wallets in India: Developing an Integrated Framework.
Roy, Shaunak (2023) state that demonetization in triggering the adoption of mobile wallets by customers in India. The study develops an integrated framework to understand the factors that influence customer adoption of mobile wallets. The cash crunch that followed demonetization led to a significant increase in the use of digital payment methods, including mobile wallets. The study found that customers who were previously hesitant to adopt mobile wallets due to concerns about security and privacy were more willing to use them in the aftermath of demonetization. The adoption of mobile wallets was influenced by a range of factors, including perceived usefulness, ease of use, and perceived risk. The study suggests that customer education and awareness campaigns, as well as efforts to improve the security and reliability of mobile wallet platforms, are important for driving the widespread adoption of mobile wallets.
CONCLUSION
Demonetization in India had significant impacts on the Indian economy, society, and culture. While it was intended to curb corruption, black money, and counterfeiting, it had far-reaching consequences on businesses, farmers, and informal workers who relied heavily on cash transactions. The cash crunch that followed demonetization led to a significant decline in GDP growth, increased unemployment, and inflation in the short term. However, it also led to a surge in digital payments and the adoption of mobile wallets, as customers sought alternative payment methods in the absence of cash. The effects of demonetization are still being felt in India, and it remains a topic of debate and discussion. While some argue that it was a bold move to address corruption and other issues, others contend that it was poorly executed and caused more harm than good. Regardless of one’s position on demonetization, it is clear that the policy had significant impacts on the Indian economy and society, and serves as a cautionary tale of the potential unintended consequences of major economic policy decisions.
REFERENCE
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