Page 1 of 9
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 05
May 2019
Available online: https://ejbss.org/ P a g e | 365
Demonetisation and its Impact on Major Macro Economics
Indicators in India
Dr. Sandeep kumar
Assistant Professor (Economics)
Sh L.N. Hindu College Rohtak
Preeti Dabas
Research Scholar. Dept of Economics
MDU, Rohtak
Abstract
This research paper tries to highlight the impact of demonetisation on different sector of
economy. Demonetisation is Monterey tools that applied too withdrawal of a particular form
of currency from circulation. Indian economy experienced three time demonetisation i.e first
time in January 1946, then in January 1978 and November 2016. There is huge difference in
case of impact of magnitude in this demonetisation. The current demonetisation (November
2016) had more effect on economy as compare to earlier decisions. Many news agencies and
report considered this era as the black days of economy. Many studies favour and others
against this decisions. The present research paper is also an attempt in this direction and
examines the impact of demonetisation on Indian economy. The study based of secondary data
that collected different government agencies. The paper concludes on the note that there were
initial hiccups in the economy and demonetisations expected to deliver long-term benefits.
Key Words: Currency, Digital, Demonetisation, High Power Money,Ttrade balance.
Page 2 of 9
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 05
May 2019
Available online: https://ejbss.org/ P a g e | 366
Introduction
High power money works in economy like as blood works in human body. The importance and
value of high power money cannot be ignored. Money is always remaining the main stay of an
economy. From ancient time to e-money time it plays the main role. The importance and
significant of money got doubled in a country like India where 80 percent of all kind of
transaction were placed through cash.
In the earlier 2016 Indian economy passed through many challenges like black money, terror
funding, black marketing etc. To handle with these problems government of India took the
strongest step after independent in this regard. On November 8th, 2016, the government of India
unexpectedly declared (unlike demonetisation in foreign countries which usually occur in
context of political upheavals or wars or in case of hyperinflation or other extreme
circumstances) 86 per cent of the existing currency in circulation as illegal tender, effective at
midnight. Referred to as “demonetisation”, this policy resulted in almost 80 percent reduced in
cash availability.
The main reason of this demonetisation exercise was as: to control the corruption;
counterfeiting; the banned the use of high denomination notes for terrorist activities; and
especially the accumulation of “black money”, generated by income that has not been
declared to the tax authorities (Economic Survey, 2016-17). However, the government seemed
to change its goal posts towards cash-less economy and others. India has traditionally been a
cash intensive economy. According to an estimate, about 78 per cent of all consumer payments
in India are affected in cash (Government of India, 2016). It was, therefore, obvious that
currency squeeze during the demonetisation period would have had some adverse impact on
economic activity, although such impact was for a short period only.
Many studies have been conducted so far to examine the effect of demonetisation on economy.
Some of them focused on failure and other justified its good effect. Many articles proved that it
was totally crashed of economy and it was a failure of Indian banking system.
Page 3 of 9
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 05
May 2019
Available online: https://ejbss.org/ P a g e | 367
There were many scales to judge the failure and success of this step. The present research paper
is also an attempt in this direction and examines the impact of demonetisation on some macro
economics variables in India.
Objectives and research Methodology
Keeping the importance of the subject, matter in view the present research focused on following
objectives- 1) To examine the deposits habits of different sector after and before demonetisation
2) To highlight the status of tax collection and direction of foreign trade before after
demonetisation
The present research work is based on secondary data collected from various government
departments. Simple statistical tools like percentage and growth rate have been used to calculate
the results.
Results discussion- TABLE-1.1
Deposits in Indian Banks and Foreign Banks
(` Billion)
Year
(As on Last Reporting
Friday)
Scheduled Commercial Banks
Indian Banks Foreign Banks Total (2+3)
2013-14 19650.51 403.90 20054.41
2014-15 21788.47
(10.87)
410.46
(1.62)
22198.92
(10.69)
2015-16 24928.46
(14.41)
436.98
(6.46)
25365.44
(14.26)
2016-17 33407.07
(34.01)
528.76
(21.00)
33935.83
(33.79)
2017-18 35993.41
(7.74)
558.96
(5.71)
36552.37
(7.71)
Note : Data are of weekly frequency till 1984-85 and fortnightly frequency thereafter.
