Topic – Demonetisation
Author- Pritesh Mehtre
MMS- Roll No- 95
Batch -B
Kohinoor Business School
Impact of demonetisation On Unbanked/Inadequately Banked Villages
Sinha P (2016) state that, urban areas are facing cash crunch, so the condition of rural areas is likely worse. Rural bank branches serve double the number of people compared to urban branches. ATMs are concentrated in urban areas, causing cash dominance in small businesses. Demonetisation has halted these businesses, except for farmers. Moving to a cashless economy takes time and cannot be rushed, as it may lead to system failures and distorted outcomes.
EFFECTS OF DEMONETISATION ON E COMMERCE
Muthulakshmi, E. Kamatchi (2016) state that, 83% of Indian consumers prefer the Cash on Delivery (COD) option in e-commerce. However, demonetization had a negative impact on online orders as consumers were hesitant to engage in online transactions. While credit and debit cards were existing payment options, the introduction of online wallet services like Amazon Pay made consumers feel more comfortable during online transactions. Demonetization also led to an increase in cashless transactions using credit and debit cards, reducing reliance on ATM queues. Even everyday purchases like vegetables began to be made through mobile wallets such as PayTm. Vendors and public transport workers also embraced online payments due to the ban on currency notes.
The Agricultural Sector: Assessing the Effects of Demonetization
Dr. V.G. Sumathy (2017) identifies two impacts of demonetization on the Indian agricultural sector. In the short term, the cash-dependent nature of agricultural transactions leads to temporary stress. Disruptions in the supply chains result in decreased sales, increased wastage, and limited access to cash, affecting farmers and farm laborers. In the long term, demonetization has the potential to bring positive changes, such as improved credit access for farmers, elimination of middlemen, direct subsidies transfer, and integration of Indian farmers into the global agricultural market, which could generate significant revenues for the country.
Impact of Demonetisation on Financial Sector:
Ramdrug A. (2016) states that demonetisation had a significant impact on various financial sectors. Commercial banks experienced a surge in deposits due to the decline in currency in circulation caused by demonetization. The aggregate deposits of the banking system increased by about INR 6,720 billion, despite outflows in NRI deposits. Non-banking financial intermediaries, such as mutual funds, benefited from the reduction in bank deposit interest rates, leading to net inflows in income/debt schemes during November 2016 to January 2017, in contrast to net outflows in the same period the previous year. This resulted in an overall increase in resources mobilized by mutual funds during that period.
IMPACT OF DEMONETISATION ON EXTERNAL SECTOR
Kalyani, P. (2016) state that Kalyani, P. (2016) state that Demonetization had a moderate impact on India’s external sector, which was already facing challenges due to a slowdown in global trade. Export growth slowed in November 2016, but recovered in December and January. Gold imports rose sharply in November, but moderated in December and January. Foreign Direct Investment (FDI) flows remained buoyant in November and December, but portfolio flows declined sharply. Demand for gold increased suddenly after demonetisation. In summary, demonetization had a mixed impact on India’s external sector. Some sectors, such as exports, were negatively affected, while others, such as FDI, were not. The overall impact was relatively small, as India’s external sector was already facing challenges.
Effects of demonetisation on Tourism
Dr. Manjari Bharadwaj (2017) state that The travel and hospitality industries are facing tough time. Many foreign trips which sponsored by big brands largely done through cash transactions are negatively affecting tourism industry and revenues. India’s hospitality industry has been severely affected as the hotels have lost a large number of pay-in- cash-only clientele due to demonetization. Around 60 to70 percent drop in hotel bookings has been reported.
Impact on Seasonal Workers/Daily Workers
Sinha A. (2016) state that Seasonal/Daily workers will be among the worst hits of the demonetisation move. Mostly daily workers receive their wages on the basis of work they did per day. Cash crunch is very likely to result in delay or withholding of their payments. Apart from them, a large section of rural population depends upon the sale of their produce like vegetables, milk, eggs, etc which are perishable. There will be severe impact on these producers whose daily bread & butter depend upon their daily sale. Most of these people do not have sufficient savings to sustain their daily lives.
Demonetization and the Impact on Political Party Funding
Dr. Dilip Kumar, Harmeet Kaur (2017) state that Kochhar It is a known fact that political parties are major movers of black money transactions. The sources of most of such funds are never disclosed. The majority of this funding is in cash which is 40% to 50%, and when it comes to Regional Parties it goes up to 50% to 60%. (Source: Media Reports). An assembly seat candidate spent on an average Rs. 4-5 Crores on Campaigning that is likely to go down drastically. This move will surely desiccate most of the parties of their resources.
The Impact of Demonetization on the Real Estate Market
Sanjeev Kumar Singh (2017) state that Real estate is expected to be one of the most affected sectors. The number of buyers are expected to come down and consequently low demand will bring about lower prices in the short term. However, it will subsequently help in improving the sector’s prospects. Unorganised builders will be most affected and the sector will drag down cement and ceramic sectors also along with it.
Another view point is that a majority of purchase transactions in this sector are backed by loan financing. Hence, it is unlikely that this sector would be much affected. Secondary market of this sector is supposedly driven by a large cash component. Hence, in short term, this particular sector may suffer. Consequently, demand for residential real estate in the primary market may be improved.
Impact of demonetisation on Mandi
Kaur, Sandeep (2016) state that A related impact has been observed in the vegetable market in India. Trade has been hit hard at the largest vegetable market in North India – the Chandigarh vegetable market as per Times Now Report.
Drivers who have come from far off places like Indore and Nasik say it takes 2 to 3 days for unloading to happen since there is no money in the market to do transactions. They say they are not able to sell perishable produce like vegetables and fruits.
People and traders here make transactions with cash are suffering due to the demonetisation move initiated by the Government of India.Traders who bring vegetables in vehicles complain that sales have dried up as cash has dried up. They also say they do not have money even to go back to their homes.
Conclusion:
In conclusion, the impact of demonetisation in India was far-reaching and affected various sectors of the economy, including the unbanked and inadequately banked villages, the e-commerce sector, the agricultural sector, and the financial sector. While the move was aimed at curbing black money and promoting a cashless economy, it had short-term negative impacts on these sectors, including temporary stress, reduced sales, and disruptions in supply chains. However, the long-term impact of demonetisation could potentially bring about transformational changes, including better access to credit for farmers and the elimination of middlemen. The financial sector experienced a surge in deposits, while non-banking financial intermediaries saw a shift in investor preference towards debt-oriented mutual funds. Overall, the impact of demonetisation on India’s external sector was moderate but added to the existing challenges.
REFERENCES
[1]. Kaur, Sandeep (2016). Demonetisation and Its Impact in India. International Journal of Research, 3(17)
[2]. Kalyani, P. (2016). An Empirical Study of the Effects of Demonetisation in India in the Year 2016 and Analyzing Shifting Trends in Marketing / Purchasing to The Alternative Options. Journal of Management Engineering and Information Technology,3(6),69-82
[3]. Muthulakshmi, E. Kamatchi (2016). Impacts of Demonetisation on Indian Economy-Issues & Challenges, IOSR Journal of Humanities And Social Science, 34-38
[4]. Ramdrug A. (2016). Demonetisation: Redefining Indian Ecomnomy. International Journal of Commerce and Management Research, 2(12), 7-12
[5]. Sinha A. (2016). Aftermath of Demonetisation on Rural Population. International Journal of Research in Economics and Social Sciences, 6(11), 233-228
[6]. Singh P. (2016). Impact of Demonetisation on Indian Economy. International Journal of Science Technology and Management, 5(1), 197-215
[7].IOSR Journal Of Humanities And Social Science (IOSR-JHSS) e-ISSN: 2279-0837, p-ISSN: 2279-0845. PP 35-38 www.iosrjournals.org.
[8] Dr. Dilip Kumar , Harmeet Kaur Kochhar on Case Study of Punjab and Uttar Pradesh 2017 Legislative Election.
[9] IMPACT OF DEMONETIZATION ON TOURISM INDUSTRY IN INDIA: AN OVERVIEW by Dr. Manjari Bharadwaj