Demonetisation project=12
- 5. DEMONETISATION REASON OF DEMONETISATION IN INDIA POSITIVE & NEGATIVE EFFECT DEMONETISATION EFFECT IN WORLD DEMONETISATION IN INDIA DEMONETISATION INDIAN ECONOMY Sinha's Presentation
- 7. WHAT IS DEMONETISATION? Demonetization is the act of stripping a currency unit of its status as legal tender. Demonetization is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit.
- 9. On 8 november 2016 PM Narendra Modi announced the demonetisation in an unscheduled live televised address at 20:00 Modi declared that use of all ₹500 and ₹1000 banknotes would be invalid past midnight, and announced the issuance of new ₹500 and ₹2000 banknotes in exchange for the old banknotes.
- 10. Meaning of demonetisation Demonetisation is the act of stripping a currency unit of its status as legal tender. The old unit of currency must be retired and replaced with a new currency unit.
- 11. The Reserve Bank of India stipulated a window of fifty days until December 30, 2016 to deposit the demonetised banknotes in bank accounts. The banknotes could also be exchanged over the counter of bank branches upto a limit that varied over the days: Initially, the limit was fixed at ₹4,000 per person from 8 to 13 November. This limit was increased to ₹4,500 per person from 14 to 17 November. The limit was reduced to ₹2,000 per person from 18 November. All exchange of banknotes was abruptly stopped from November 25, 2016. International airports were also instructed to facilitate an exchange of notes amounting to a total value of ₹5,000 for foreign tourists and out-bound passengers
- 12. Strikes As the demonetisation was opposed in both houses of the parliament, it triggered organised nationwide strikes across India. The Opposition involving parties like Indian National Congress, BSP,DMK, JD(U), AIADMK, Nationalist Congress Party, Left, Rashtriya Janta Dal and the Samajwadi Party decided to observe ‘Akrosh Diwas’ as, a protest campaign day on November 28 and launch protests in front of banks, demanding that money be returned to people.
- 13. The decision met with mixed initial reactions. Several bankers like Arundhati Bhattacharya(Chairperson of State Bank of India) and Chanda Kochhar (MD & CEO of ICICI Bank) appreciated the move in the sense that it would help curb black money. Infosys founder N.R. Narayna Murthy praised the move. Finance Minister Arun Jaitley said that demonetisation would clean the complete economic system, increase the size of economy and revenue base
- 14. The Indian Supreme Court while hearing one among a slew of cases filed against the sudden demonetisation decision in various courts, observed that it "appears to be carpet bombing and not surgical strike" which government repeatedly claims it to be. Nobel laureate Indian economist Amartya Sen, severely criticised the demonetisation move calling it a "despotic action" among other things. Former Senior Vice-President and Chief Economist of the World Bank, Kaushik Basu, called it a 'major mistake' and said that the 'damage' is likely to be much greater than any possible benefits.
- 15. It has been reported that 97% of the demonetised notes are back in banks and banks have received Rs 14.97 trillion ($220 billion) as of December 30 out of the 15.4 trillion rupees that were demonetised. The return of 97% of money back in bank have a negative impact on government's move against black money.
- 16. Reasons for Demonetization IN INDIA •We knew terrorism is a frightening threat, but who funds these terrorists? Our enemies they use the fake currency to sponsor terror-this was proven many a times. •Corruption and black money are the major obstacles in our country. It is weakening the efforts to remove poverty. Our country is rapidly increasing in terms of growth and we are in No.1 position in terms of growth but we are ranked 76 in Global Corruption Perception ranking. It clearly shows how corruption and black money have spread their tentacles.
- 18. IMPACT OF DEMONETIZATION Sinha's Presentation
- 19. • The major decision which is made by the government will help us to eradicate black money, corruption to some extent by replacing the cash transactions in our daily activities. Also Financial Intelligence Unit will track all details of the transactions from the banks. So now it is really difficult to get rid of the black money.
- 20. Demonetization impacted 20 Trillion Human Trafficking Industry other sectors like drug trafficking, illegal trade and the money use in it, funding of election and involvement of various terrorist groups effected badly. Steps towards cashless economy Real estate can see significant course of correction Less chance of avoiding taxes Parallel economy
- 21. The Demonetization has badly hit Maoist and Naxalites as well. The surrender rate has reached its highest since the demonetization is announced. It is said that the money these organizations have collected over the years have left with no value and it has caused them to reach to this decision.
- 22. • Real estate industry is totally corrupted and now by this stringent decision the real estate sector will bring in more transparency. By doing it in this way we will have more credibility, making it more attractive to the foreign investors as well as domestic investors.
- 23. A huge fall in HUMAN trafficking. All the transaction of selling and buying used to happen through cash mainly in the form of ₹500 & ₹1000 notes but now there is no liquidity which has hit the business badly.
- 24. transactions – Demonetisation has crippled the hawala rackets. Hawala is a method of transferring money without any actual money movement. Hawala is used as a means for facilitating money laundering and funding terror.
- 25. • The scarcity of cash due to demonetisation led to chaos, and most people holding old banknotes faced difficulties exchanging them due to endless lines outside banks and ATMs across India, which became a daily routine for millions of people waiting to deposit or exchange the ₹500 and ₹1000 banknotes since 9 November.
- 26. Several people were reported to have died from standing in queues for hours to exchange their old banknotes. By the end of the year 2016, opposition leaders claimed that over 100 people had died due to demonetisation.
- 27. The day after the demonetisation announcement, BSE SENSEX crashed nearly 1,689 points and NIFTY 50 plunged by over 541 points.By the end of the intraday trading section on 15 November 2016, the BSE SENSEX index was lower by 565 points and the NIFTY 50 index was below 8100 intraday.
- 28. Agriculture Transactions in the Indian agriculture sector are heavily dependent on cash and were adversely affected by the demonetisation of ₹500 and ₹1,000 bank notes. Due to scarcity of the new banknotes, many farmers have insufficient cash to purchase seeds, fertilisers and pesticides. Farmers and their unions conducted protest rallies against the demonetisation.
- 29. The demonetisation led to unavailability of cash to pay for food products. The reduction in demand that arose in turn led to a crash in the prices of crops. Farmers were unable to recover even the costs of transportation from their fields to the market from the low prices offered. The prices dropped as low as 50 paise per kilo for tomatoesand onions.This forced the farmers across the country to dump their products in desperation. Some farmers dumped their produce in protest against the government.
- 30. By the second week after demonetisation of ₹500 and ₹1,000 banknotes, cigarette sales across India witnessed a fall of 30– 40%, while E-commerce companies saw up to a 30% decline in cash on delivery (COD) orders. The demand for point of sales (POS) or card swipe machines has increased.E-payment options like Paytm and , has also seen a rise. According to data of Pine Labs, the demand for its POS machines doubled after the decision..
- 31. Results Income tax raids and money came into system Fighting corruption and counterfeiting Expanding the formal economic grid and building digital economy The Indian finance minister Arun Jaitley claimed the direct tax collection has increased 14.4% Government reports a combined 268% year on year increase in tax collection for november 2016.
- 33. LIST OF COUNTRIES THAT HAVE TRIED DEMONETIZATION: • UNITED STATES (1873) • UNITED STATES (1969) • INDIA (1978) • GHANA (1982) • NIGERIA (1984) • MYANMAR (1987) • SOVIET UNION (1991) • ZAIRE(1993) • AUSTRALIA (1996) • EUROPEAN UNION (2002) • NORTH KOREA (2010) • ZIMBAWE (2015) • INDIA(November, 2016) • VENEZUELA (December, 2016)
- 34. One of the earliest instances of demonetization can be witnessed in United States on mandated removal of silver in favour of adopting the gold standard as the legal tender. This led to a contraction of the money supply and subsequently a 5-year economic depression in the country.
- 35. In 1969, the United States of America under President Richard Nixon declared all bills above $100 null and void ,to curb the existence of black money in the nation and restore the country’s sheen. The $100 bill is the most widely circulated denomination till date.
- 36. India witnessed demonetization before in 1978 when the Janata party coalition in order to counter black money in the economy decided to scrap 10000, 1000 and 500 rupee notes. The RBI governor back then, was not in favour of the step since it was believed that the step was targeted at the corrupt predecessor government leaders.
- 37. To reduce tax evasion and clear excess liquidity, the country demonetized its 50 cedi currency. The exercise was highly unsuccessful as the public started turning towards foreign currency and physical assets.
- 38. The military government under Muhammadu Buhari started issuing new currency notes with new colours in an attempt to make the old notes obsolete. The movement aimed towards fixing a debt-ridden and inflated economy failed miserably.
- 39. Under the leadership of Mikhail Gorbachev, 50 and 100 rubble notes were removed from circulation in an attempt to combat the parallel economy. The removed notes formed about one third of the total money in circulation. There were economic dislocations and several Soviet republics such as Kazakhstan and Ukraine were severely affected.
- 40. Under the dictatorship of Mobutu Sese Seko, successive currency reforms were rolled out. Obsolescent currency was withdrawn from the system in 1993. Increasing economic disruptions resulted in ouster of Mobutu in 1997.
- 41. In order to improve upon the security features and curb black money in the economy, the Australian government withdrew all paper-based notes replacing them with polymer-based note. This helped in making Australia a business friendly country, despite the initial costs incurred to manufacture polymer-based notes.
- 42. Introduction of a unified currency ‘Euro’ on Jan 1, 2002 called for demonetization of the existing currencies of 12 countries under the European Union. About eight billion notes and 38 billion coins were distributed through 218,000 banks, post offices and 2.8 million sales outlets. Prior preparations starting from mid 1998 and informing the citizens well in advance resulted in this successful currency changeover.
- 43. In order to halt black market and improve the economy, Kim Jong–II government introduced currency changes. The move backfired as the price of necessity goods increased and people strongly resisted the move. This was followed by the murder of the finance minister.
- 44. The military invalidated nearly 80 percent of the value of money in circulation with the motive to curb the rising black economy. It resulted in a student demonstration followed by a government crackdown the very next year.
- 45. On November 8,2016 PM Narendra Modi declared that from the stroke of midnight 500 and 1000 rupee notes would cease to be legal tender. This immediately sparked unrest and an estimated 15 tonnes of gold worth Rs 5000 crores was bought within an hour of the announcement. ATMs and banks were engulfed with people demanding and depositing cash. The situation only deteriorated thereafter.
- 46. In order to curb the rising inflation rate that reached 425% and tackle the growing threat of the transnational mafias breeding in the country. The Nicolas-Maduro led government announced demonetization of its 100 Bolivar notes (which form 77% of the nation’s cash in circulation).
- 47. In order to stabilize its economy racked by hyperinflation, the government decided to replace the Zimbabwe dollar with the American dollar in 2015. The move, carried out in a haste turned out to be unsuccessful as most wealth holders saw the value of their accumulated savings receding.
- 49. Process to exchange demonetised currency notes
- 50. Impact Of Demonetization Inflation : It will cause inflation in the market as people who have earned money through illegal ways would be afraid to declare the money as they may be prosecuted by the Income tax department on the legitimacy of their income. Reduction in Monetary Circulation: This will lead to reduction of money circulation in the economy leading to deflation. Value of money will be increasing which we have because the total money supply will be going down but the commodities and things available in the market have not gone down. It will lead to inflation slowly but not overnight.
- 51. Impact Of Demonetization(contd.) Cash Deposits in Banks: A lot of cash which are legally earned will be deposited in the banks and now the banks with more deposits will be able to do more lending. Easy Loans: Loans will become easier and interest rates may come down. As banks will have more money so more loans will be given out which will increase the money supply in the market and it will create inflation.
- 52. PROS AND CONS OF DEMONETIZATION: PROS: • The major decision which is made by the government will help us to eradicate black money, corruption to some extent. • Due to lack of funding there will be no arms smuggling and all the terrorist activities will also be choked. • Financial Intelligence Unit will track all details of the transactions from the banks. So now it is really difficult to get rid of the black money.
- 53. PROS (CONTD.): • Exchange of money in banks can only be done producing a valid identity cards like PAN, aadhar card and electoral card from 10 to 24 November with a daily limit of Rs.4000. By doing so it will be easy for the government to track the money which is being exchanged in banks. There is no limit if the amount which we are exchanging is legal amount. • Real estate industry is totally corrupted and now by this stringent decision the real estate sector will bring in more transparency. By doing it in this way we will have more credibility, making it more attractive to the foreign investors as well as domestic investors.
- 54. CONS: • It will cause great inconvenience to common man who will start running to bank to exchange Rs.500 and Rs.1000 notes. • By replacing all the Rs.500 and Rs.1000 denomination notes, as ordered by the government, could cost the RBI at least Rs.12000 crore. • It will be very difficult for half of the population who are not well versed with the card transactions. • The major problem is that big fishes will be left out whose black money is in the form of foreign currency, gold and property and stashed in tax havens.
- 55. Effect of Demonetization on Indian Economy • It will likely hit the economy hard in the short term.. The service sector, which dominates economic activity and involves a sizable chunk of cash transactions, will likely be hit the hardest. • GDP growth in the quarters from September to December 2016 and January to March 2017 could be significantly lower than previous years. Some bounce back should be seen in the first quarter of fiscal 2017–2018. • The demonetization that has been in effect since November 9 is expected to have a negative impact on inflation. Consumer spending activity fell to a near halt.
- 56. Effects of demonetisation The Demonetization has badly hit Maoist and Nasalises as well. The surrender rate has reached its highest since the demonetization is announced. It is said that the money these organizations have collected over the years have left with no value and it has caused them to reach to this decision. Real estate industry is totally corrupted and now by this stringent decision the real estate sector will bring in more transparency. By doing it in this way we will have more credibility, making it more attractive to the foreign investors as well as domestic investors.
- 57. A huge fall in HUMAN trafficking was assumed. All the transaction of selling and buying used to happen through cash mainly in the form of ₹500 & ₹1000 notes but now there is no liquidity which has hit the business badly. The scarcity of cash due to demonetisation led to chaos, and most people holding old banknotes faced difficulties exchanging them due to endless lines outside banks and ATMs across India, which became a daily routine for millions of people waiting to deposit or exchange the ₹500 and ₹1000 banknotes since 9 November.
- 58. Several people were reported to have died from standing in queues for hours to exchange their old banknotes. By the end of the year 2016, opposition leaders claimed that over 100 people had died due to demonetisation.
- 59. The day after the demonetisation announcement, BSE SENSEX crashed nearly 1,689 points and NIFTY 50 plunged by over 541 points. By the end of the intraday trading section on 15 November 2016, the BSE SENSEX index was lower by 565 points and the NIFTY 50 index was below 8100 intraday. Transactions in the Indian agriculture sector are heavily dependent on cash and were adversely affected by the demonetisation of ₹500 and ₹1,000 bank notes. Due to scarcity of the new banknotes, many farmers have insufficient cash to purchase seeds, fertilisers and pesticides. Farmers and their unions conducted protest rallies against the demonetisation.
- 60. Support The decision met with mixed initial reactions. Several bankers like Arundhati Bhattacharya(Chairperson of State Bank of India) and Chanda Kochhar (MD & CEO of ICICI Bank) appreciated the move in the sense that it would help curb black money. Infosys founder N.R. Narayna Murthy praised the move. Finance Minister Arun Jaitley said that demonetisation would clean the complete economic system, increase the size of economy and revenue base
- 61. Demonetization for vendors The need for this paper is to shows that how demonetization has affected the unorganized sectors of economy with the special reference to hawkers and vendors.
- 62. Problems in withdrawing cash However if they arrange to buy card swiping machine or Smartphone but they don’t know how to access it and if somehow they learn to access them then also they face several problems such as: ... • how to recover deduction of money from failed transaction. ... • if they input wrong amount how to correct it. ... • how to check whether or not amount is deducted from failed transaction.
- 63. Demonetization has motivated cashless transaction in economy. Because of shortage of cash people start preferring online mode of payment and shopkeepers started prevailing online mode of payments . After situation being handled people still prefer online mode of payment as it is much safer to carry plastic money or PayTm rather than to keep cash in wallet. It’s a kind of 1st step toward PM’s digital India mission.
- 64. Facts and figures It has been reported that 97%of the demonetised notes are back in banks and banks have received Rs 14.97 trillion ($220 billion) as of December 30 out of the 15.4 trillion rupees that were demonetised. The return of 97% of money back in bank have a negative impact on government's move against black money.
- 65. Effect on stock market
- 67. 50% of them do not have bank accounts, and 30% of them access bank only in their home town. Whereas only 20% of them have bank account in the city they are living. So it was bit difficult for hawkers and vendor to change demonetized notes of 500 and 1000 Rs. with new currency. 20 30 50 having bank account in current city/ town having bank account in home town don’t have any bank account
- 68. Some of them have opened their bank accounts through Jan Dhan Yojana but hardly had they deposited any of their savings in them. They prefer to keep their savings at home so that they can use them at the time of uncertainty. Only 20% of them deposit their savings in bank accounts. 20 80 prefer to save donot prefer to save
- 69. Following graph shows percentage of vendors and hawkers able to withdraw money from bank/ATM. easily little bit difficulty very much difficulty not at all 15 50 40 5
- 70. 85% of hawkers and vendors face difficulty in using online mode of payment while 15% of them find out it easy to use. 85% 15% difficulty in operation easily operated
- 71. 70% of vendors are availing online payment services to keep their business going. vendors availing online payments 70
- 72. 55% of vegetable vendors and street vendors had installed PayTm in their mobile, 30% of them are using card swiping machines and the one who are not having Smartphone’s i.e. 15% are using *99# service started by our PM for accepting payment. PayTm Card Swiping Machine *99# service 55 30 15
- 73. Will Demonetization in India Impact Your Loan Burden? Rates are already on the decline After the demonetization announcement on November 8, Indian banks saw a rise in deposits. Banks also saw a rise in term deposit accounts since the demonetization. Due to these factors, commercial banks sharply reduced their deposit rates. Loan burden will also fall Apart from cutting deposit rates, banks reduced their lending rates as well. In India, loans sanctioned from April 1,2016 are with reference to the MCLR (Marginal Cost of funds-based Lending Rate: The marginal cost of funds based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend), instead of the Base Rate, which was used earlier. It will translate into lower interest rates on existing floating rate loans and new loans.
- 74. Will Demonetization in India Impact Your Loan Burden?(Contd.)
- 75. CASH (CONTD.) :
- 76. After demonetization weekly sales of hawkers and vendors decreased up to 70%-80% The main reason for decrease in their sales was shortage of cash as instead of buying from vendors and hawkers people preferred to go to modern retail stores and departmental stores where online payment is acceptable so that they can make transaction without cash. Demonetization on other side have some positive aspect too as on the other hand some vegetable vendors and small traders have began the use of cashless payments like Paytm, UPI, Mobiwik, free charge, card swiping etc. as people were unable to undertake transaction through cash in the absence of Rs 500 and Rs 1000. It has somewhere promoted PM’s cashless India mission.
- 77. Group name : crazy boys Team captain : Pavan Chelumalla Project designer : Chirag Rawal Project co- ordinator : Mukesh. Pathak Project editor : Sohel Ansari project animating : Chandan.kusawaha Voice designer : Manan. Mundephi File classifying : Srinu Virat Slide designing : Rakesh. Vanga Researching data : Venky kota & Rudra Pavan Presentation designing : Shiva kurapathi