Demonetization •Demonetization is a process by which a series of currency will not be legal tender. The series of currency will not acceptable as valid currency. The same thing happens with the Rs. 500 and Rs. 1000 note demonetization. What Happened on Demonetization? •On 8th November 2016, Government of India had announced that from today onward rupees 500 and 1000 rupee note will not be a legal tender. •This means that 500 and 1000 rupee note will be accepted by anyone except the organisation declared by government. •They can change the currency from the banks and post offices till 30th December 2016. Exchange of old notes People gathered at ATM of Axis Bank in Mehsana, Gujarat to withdraw cash following deposit of demonetised currency notes in bank on 15 November 2016. The Reserve Bank of India stipulated a window of fifty days until December 30, 2016 to deposit the demonetised banknotes as credit 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.
Facts and figures
Up to 97% of the demonetised bank notes have been deposited into banks which have received a total of ₹14.97 trillion ($220 billion) as of December 30 out of the ₹15.4 trillion that was demonetised. This is against the government's initial estimate that ₹3 trillion would not return to the banking system.
Of the ₹15.4 trillion demonetised in the form of ₹500 and ₹1000 bank notes of the Mahatma Gandhi Series, ₹9.2 trillion in the form of ₹500 and ₹2000 bank notes of the Mahatma Gandhi New Series has been recirculated as of 10 January 2017, two months after the demonetisation.
Withdrawal limits
Cash withdrawals from bank accounts were restricted to ₹10,000 per day and ₹20,000 per week per account from 10 to 13 November. This limit was increased to ₹24,000 per week from November 14, 2016.
A daily limit on withdrawals from ATMs was also imposed varying from ₹2,000 per day till 14 November, and ₹2,500 per day till 31 December. This limit was increased to ₹4,500 per day from January 1, and again to ₹10,000 from January 16, 2017. History of Demonetization in India •This is not The First time When Indian Currency is Demonetised In India . •The first instance was in 1946 and the second in 1978 when an ordinance was promulgated to phase out notes with denomination of Rs 1,000, Rs 5,000 and Rs 10,000. •The highest denomination note ever printed by the Reserve Bank of India was the Rs 10,000 note in 1938 and again in 1954. But these notes were
demonetized in January 1946 and again in January 1978, according to RBI data. •Rs 1,000 and Rs 10,000 bank notes were in circulation prior to January 1946. Higher denomination banknotes of Rs 1,000, Rs 5,000 and Rs 10,000 were reintroduced in 1954 and all of them were demonetized in January 1978. •The Rs 1,000 note made a comeback in November 2000. Rs 500 note came into circulation in October 1987. The move was then justified as attempt to contain the volume of banknotes in circulation due to inflation.
Causes of Demonetization •There can be many causes of Demonetisation in any economy some of them are : Introduction of New Currency ,Black Marketing, Currency Storage, Corruption and others. •There will be excess fake currency in the economy is main reason of demonetisation. Effects of Demonetization 1. Cash shortage 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. ATMs were running out of cash after a few hours of being functional, and around half the ATMs in the country were nonfunctional. Sporadic violence was reported in New Delhi, but there were no reports of any grievous injury, people attacked bank premises and ATMs, and a ration shop was looted in Madhya Pradesh after the shop owner refused to accept ₹500 banknotes.
The CMD of Punjab National Bank said that panic after demonetisation started fading on 19 November 2016. As of 18 December 2016, there were still long queues at banks and ATMs.
2. Deaths
Several people were reported to have died from standing in queues for hours to exchange their old banknotes. Deaths were also attributed to lack of medical help due to refusal of old banknotes by hospitals. As of 15 November 2016, the attributed death toll was 25. and 33 deaths as of 18 November. In an interview, Chief Minister of Delhi Arvind Kejriwal lashed out at a BBC reporter who asked him to justify his 19 November claim that 55 deaths were linked to demonetisation. By the end of the year, opposition leaders claimed that over 100 people had died due to demonetisation.
3. Stock market crash
As a combined effect of demonetisation and US presidential election, the stock market indices dropped to an around six-month low in the week following the announcement. 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.
4. Transportation halts
After the demonetisation was announced, about 800,000 truck drivers were affected with scarcity of cash, with around 400,000 trucks stranded at major highways across India were reported. While major highway toll junctions on the Gujarat and Delhi-Mumbai highways also saw long queues as toll plaza operators refused the old banknotes.
Nitin Gadkari, the Minister of Transport, subsequently announced a suspension of toll collections on all national highways across India until
midnight of 11 November, later extended until 14 November and again until midnight of 18 November, and yet again till 2 December. 5. Agriculture
Transactions in the Indian agriculture sector are heavily dependent on cash and were adversely affected by the demonetisation of ₹500 and ₹1,000 banknotes. Due to scarcity of the new banknotes, many farmers have insufficient cash to purchase seeds, fertilisers and pesticides needed for the plantation of rabi crops usually sown around mid-November. Farmers and their unions conducted protest rallies in Gujarat, Amritsar and Muzaffarnagar against the demonetisation as well as against restrictions imposed by the Reserve Bank of India on district cooperative central banks which were ordered not to accept or exchange the demonetised banknotes.
6. Dumping of agricultural produce
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 tomatoes and onions. This forced the farmers across the country to dump their products in desperation. Some farmers resorted to burying unsold vegetables. Agricultural produce such as vegetables, foodgrains, sugarcane, milk and eggs were dumped on roads. Some farmers dumped their produce in protest against the government.
7. Banking A State Bank of India branch remained open at night, and a long queue of people waited outside the ATM to withdraw money. In the first four days after the announcement of the step, about ₹3 trillion (US$45 billion) in the form of old ₹500 and ₹1,000 banknotes had been deposited in the banking system and about ₹500 billion (US$7.4 billion) had been dispensed via withdrawals from bank accounts, ATMs as well as
exchanges over the bank counters. Within these four days, the banking system has handled about 180 million transactions. The State Bank of India reported to have received more than ₹300 billion (US$4.5 billion) in bank deposit in first two days after demonetisation. A spike in the usage of debit card and credit card post demonetisation was also reported.
Between November 10 and November 27, banks reported exchange and deposits of demonetised banknotes worth ₹8.45 trillion (US$130 billion) (exchange of ₹339.48 billion (US$5.0 billion) and deposits of ₹8.11 trillion (US$120 billion)). During this period, an amount of ₹2.16 lakh crore (US$32 billion) had been withdrawn by people from their accounts.
In Malda, a district believed to be a transit-point for fake Indian currencies, a large sum of cash deposits in dormant accounts were also reported. According to The Economic Times, more than 80 percent of fake currency in India originates from Malda district in West Bengal. 8. Business
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. Several e-commerce companies hailed the demonetisation decision as an impetus to an increase in digital payments. They believe that it would lead to a decline in COD returns which is expected to cut down their costs.
The demand for point of sales (POS) or card swipe machines has increased. E-payment options like PayTM and Instamojo Payment Gateway, PayUMoney has also seen a rise. According to data of Pine Labs, the demand for its POS machines doubled after the decision. Further it states that the debit card transactions rose by 108% and credit card transactions by 60% on 9 November 2016.
9. Forecast of GDP growth rate
Global analysts cut their forecasts of India's GDP growth rate due to demonetisation. India's GDP in 2016 is estimated to be US$2.25 trillion, hence, each 1 per cent reduction in growth rate represents a shortfall of US$22.5 billion (Rs. 1.54 lakh crores) for the Indian economy. 10. Drop in industrial output
There was a reduction in industrial output as industries were hit by the cash crisis. The Purchasing Managers' Index (PMI) fell to 46.7 in November from 54.5 in October, recording its sharpest reduction in three years. A reading above 50 indicates growth and a reading below shows contraction. This indicates a slowdown in both, manufacturing and services industries. The PMI report showed also showed that the reduction in inflation in November was due to shortage in money supply.
The growth in eight core sectors such as cement, steel and refinery products, which constitute 38% of the Index of Industrial Production (IIP), was only to 4.9 percent in November as compared with 6.6 percent in October.
11. Income tax raids and cash seizures
The Finance Ministry instructed all revenue intelligence agencies to join the crackdown on forex traders, hawala operators and jewellers besides tracking movement of demonetised currency notes. It was reported that the Prime Minister's Office (PMO) and the Prime Minister Modi himself were directly coordinating the raids conducted by the Income Tax, Enforcement Directorate (ED) and other agencies. As of 23 December, PMO received around 700 calls giving information about black money and it directly forwarded the information to various law enforcement agencies for further action.
Income Tax departments raided various illegal tax-evasive businesses in Delhi, Mumbai, Chandigarh, Ludhiana and other cities that traded with demonetised currency. The Enforcement Directorate issued several FEMA
notices to forex and gold traders. Large sum of cash in defunct notes were seized in different parts of the country. In Chhattisgarh liquid cash worth of ₹4.4 million (US$65,000) was seized.
As of December 28, official sources said that the Income Tax department detected over ₹4,172 crore of un-disclosed income and seized new notes worth ₹105 crore as part of its country-wide operations. The department carried out a total of 983 search, survey and enquiry operations under the provisions of the Income Tax Act and has issued 5,027 notices to various entities on charges of tax evasion and hawala-like dealings. The department also seized cash and jewellery worth over ₹549 crore out of which the new currency seized (majority of them ₹2000 notes) is valued at about ₹105 crore. The department also referred a total of 477 cases to other agencies like the CBI and the Enforcement Directorate (ED) to probe other financial crimes like money laundering, disproportionate assets and corruption.
12. Seizures of ₹2000 notes
Huge amounts of cash in the form of new notes were seized all over the country after the demonetisation. As of December 2016, over 4 crore in new banknotes of ₹2000 were seized from four persons in Bangalore, ₹33 lakh in ₹2000 notes were recovered from Manish Sharma, an expelled BJP leader in West Bengal, and ₹1.5 crore was seized in Goa. 900 notes of the new ₹2000 notes were seized from a BJP leader in Tamil Nadu. Around ₹10 crore in new notes were seized in Chennai.
As of 10 December, ₹242 crore in new notes had been seized. It was noted in the media that while people were dying in queues to obtain a few thousand rupees in cash, persons with the right connections were able to amass crores of rupees in new notes, thus rendering the demonetisation exercise futile.
It was announced by the government that the seized notes will be brought into the mainstream as soon as possible to ease out the cash problem. Earlier, agencies kept all seized material, including cash seizures, in their
strong rooms as evidence till the case was adjudicated by the courts. The seized money was then deposited into the Consolidated Fund of India. Sometimes, income tax cases took years to resolve, still all seized material was kept in safe lockers of the tax department.
13. Railways
As of November 2016, Indian Railways did not have the option to make payment with cards at the counters. After the demonetisation move, the government announced to make card payment options available at railway counters in the country. Evasion attempts 1. Gold purchases In Gujarat, Delhi and many other major cities, sales of gold increased on 9 November, with an increased 20 to 30% premium surging the price as much as ₹45,000 (US$670) from the ruling price of ₹31,900 (US$470) per 10 grams (0.35 oz).
Income Tax officials raided multiple branches of Axis Bank and found bank officials involved in money laundering acts, exchanging old notes for gold.
2. Donations in temples
In India, the cash deposited into hundis, or cash collection boxes in temples and gurudwaras are exempted from inquiry by the tax department. This exemption is sometimes misused to launder money. After the note ban, there was a spike in donations in the form of the demonetised notes in temples. Authorities of Sri Jalakanteswarar temple at Vellore discovered cash worth ₹4.4 million (US$65,000) from the temple hundi in the form of defunct notes.
3. Multiple bank transactions
There have been reports of people circumventing the restrictions imposed on exchange transactions by conducting multiple transactions at different bank branches and also sending hired people, employees and followers in groups to exchange large amounts of banned currency at banks. In response, the government announced that it would start marking customers with indelible ink. This was in addition to other measures proposed to ensure that the exchange transactions are carried out only once by each person.
4. Railway bookings
As soon as the demonetisation was announced, it was observed by the Indian Railways authorities that a large number of people started booking tickets particularly in classes 1A and 2A for the longest distance possible, to get rid of unaccounted cash. A senior official said, "On November 13, 42.7 million passengers were nationally booked across all classes. Of these, only 1,209 were 1A and 16,999 for 2A. It is a sharp dip from the number of passengers booked on November 9, when 27,237 passengers had booked tickets in 1A and 69,950 in 2A."
The Railways Ministry and the Railway Board responded swiftly and decided that cancellation and refund of tickets of value ₹10,000 and above will not be allowed by any means involving cash. The payment can only be through cheque/electronic payment. Tickets above ₹10,000 can be refunded by filing ticket deposit receipt only on surrendering the original ticket. A copy of the PAN card must be submitted for any cash transaction above ₹50,000. The railway claimed that since the Railway Board on 10 November imposed a number of restrictions to book and cancel tickets, the number of people booking 1A and 2A tickets came down.
5. Municipal and local tax payments
As the use of the demonetised notes had been allowed by the government for the payment of municipal and local body taxes, it led to people using the demonetised ₹500 and ₹1,000 notes to pay large amounts of outstanding and advance taxes. As a result, revenue collections of the local civic bodies jumped. The Greater Hyderabad Municipal Corporation reported collecting about ₹1.6 billion (US$24 million) in cash payments of outstanding and advance taxes, within 4 days.
The tax collection by local bodies have surged over 260% and more than 15000 crore mare after 14 days of demonetization. The total indirect tax collection rose to 14.2% only in the month of December according to Finance Minister Arun Jaitley.
6. Backdated accounting
The Enforcement Directorate raided several forex establishments making back dated entries. Money laundering using backdated accounting was carried out by co-operative banks, jewellers, sellers of iPhones, and several other businesses. Impact of Demonetization on Indian Economy 1. Effects on Parallel Economy • The removal of these 500 and 1000 notes and replacement of the same with new 500 and 2000 Rupee Notes is expected to – remove black money from the economy as they will be blocked since the owners will not be in a position to deposit the same in the banks. •Temporarily stall the circulation of large volume of counterfeit currency •It would curb the funding for anti-social elements like smuggling, terrorism, espionage, etc. 2. Effects on Money Supply •With the older 500 and 1000 Rupees notes being scrapped, until the new 500 and 2000 Rupees notes get widely circulated in the market, money supply is expected to reduce in the short run.
•To the extent that black money (which is not counterfeit) does not re-enter the system, reserve money and hence money supply will decrease permanently. •However gradually as the new notes get circulated in the market and the mismatch gets corrected, money supply will pick up.
3. Effects On Demand The overall demand is expected to be affected to an extent. The demand in following areas is to be impacted particularly: 1.Consumer goods 2.Real Estate and Property 3.Gold and luxury goods 4.Automobiles (only to a certain limit) •All these mentioned sectors are expected to face certain moderation in demand from the consumer side, owing to the significant amount of cash transactions involved in these sectors.
4. Effect on Prices Price level is expected to be lowered due to moderation from demand side. This demand driven fall in prices could be understood as follows: •Consumer goods: Prices are expected to fall only marginally due to moderation in demand as use of cards and cheques would compensate for some purchases. •Real Estate and Property: Prices in this sector are largely expected to fall, especially for sales of properties where major part of the transaction is cash based, rather than based on banks transfer or cheque transactions.
5. Effect on GDP •The GDP formation could be impacted by this measure, with reduction in the consumption demand.
•However with the recent rise in festival demand is expected to offset this fall in overall impact. •Moreover, this expected impact on GDP may not be significant as some of this demand will only be deferred and re-enter the stream once the cash situation becomes normal.
6. Effect on Online Transactions and alternative modes of payment : •With cash transactions facing a reduction, alternative forms of payment will see a surge in demand. •Digital transaction systems, E wallets and apps, online transactions using E banking, usage of Plastic money (Debit and Credit Cards), etc. will definitely see substantial increase in demand. •This Will Bring More transparency In System And You can Easily track Online Money Transactions.
Will demonetization slow down India’s growth? •Yes, Demonetisation will slow down growth rate in short term and medium term because people have less money in hands. So demand is low, that is why it is hampering our growth rate. But as soon as people get money, markets will be back on track. •But its long term gain is “fictional” or say “disputed”. Some people theoretically says it will benefit the economy as government will have more revenue but others say giving a electric shock to the economy when its already under distress business sentiment can send it into coma. • India is a cash based economy and demonetization will temporarily decrease liquidity in this economy. Decreased liquidity will lead to decreased demand which will result in decreased productivity causing a slowdown in consumer market. •People have panicked due to sudden demonetization. This will force them to save and store more money. Thus, a decrease in demand leading to slowdown in consumer market.
Impact of Demonetization on Elections It is difficult to analyze the election report,as it is a game of twist and turns, it is said that ruling party wins the election, but as BJP has embarked itself for exchanging the currency, initially it was looking that BJP may thumbs down during the time of election, but people in rural and urban zone are favoring BJP. Demonetization has impact on the mindset of the people. Many people have changed their percept on the particular party. Not only that as per the Uttar Pradesh election 2017, things may change differently, as Akhilesh Yadav is not in favor of BJP for coming into the power in Uttar Pradesh, it depends on the majority of the people. The impact may effect on different constituency, such as in Punjab Assembly election in 2017, people are in favor of Narendra Modi, depending on the consequences one cannot depict the results as it may not be convincing.
Demonetization will impact coming assembly polls: Experts, politician The government's move to demonetise Rs 500 and Rs 1000 currency notes will help curb black money in elections and its impact will be visible in the upcoming assembly polls in five states, say experts, while opposition leaders called it hasty or questioned its effect.
1. Former Chief Election Commissioner S.Y. Quraishi said the move will definitely have a positive impact on the election system but more steps were needed to tackle the problem of black money in polls.
"It will definitely have some impact on free flow of money in elections but I don't think it will curb the whole menace. We all know that in Uttar Pradesh and Punjab elections, money plays a big role. There will be some control after the decision," Quraishi.
2. Jagdeep Chokkar, founder member of Association for Democratic Reforms (ADR), told that the decision will bring about reduction in black money in the country.
"This will absolutely impact the elections, particularly those parties which are gearing up for next year's assembly elections in five states.
"If political parties have organised their money then it will have no impact on them but those who would not have organised, they may find themselves in trouble. Now they will not be able to organise their unaccounted money. This will obviously impact the elections but will take much more time to completely curb the menace," he added.
3. Sangeet Kumar Ragi, who teaches at Delhi University's Political Science department, said those who use money power in elections will be severely impacted.
"Candidates who rely on wooing voters by using money will find the going difficult," Ragi said, adding that all political parties will be impacted in some way and those opposing it are doing so for petty politics.
4. Union Finance Minister Arun Jaitley, however, said the decision had no connection with elections.
"After this decision, if elections get cheaper, it will be a great service to nation. If elections get cheaper, it will be a good beginning," Jaitley.
5. His predecessor, P. Chidambaram of the Congress, said that his party will fight elections according to rules and regulations.
"I don't know... you must ask people who spend large amounts of money in elections. I don't know if people stash cash three months ahead of elections. I don't know. I know that people pull out money at the time of elections and spend it for elections. I don't know if people put it in gunny bags or suitcases
and store it somewhere. I don't know," he said to queries on the impact of the government's decision on political parties.
"Congress party, in anyway, did not have too much money even in the last elections," he said. Ban on Notes, Impact on Punjab and UP Elections 2017
Ban on Rs. 500 and Rs.1000 notes has taken the nation with a surprise, indeed a visionary decision how will this impact upcoming elections in Punjab and UP?
•Electoral funding in India is largely opaque and mostly parties claim that they have received the funding from unknown sources. India is among very few countries in the world that allows political parties to receive anonymous donations.
•However, Parties have been spending through cash and one can see elections as a game of cash. Despite the stringent rules, bribes, cash to voters is commonly used tactic to lure the votes.
•Last Lok Sabha Elections saw a major jump in illegal cash and more than Rs. 300 Crore were seized by the commission.
•UP and Punjab elections are scheduled and the latest ban on high denomination currency will force most parties to rethink their spending strategy. Caution is for those who were planning to spend outside authorized limits.
• Demonetization effect on real estate and gold transactions. With upcoming polls in Punjab and UP, this ban is to create major disruption in the electoral
spending. According to a Centre for Media Studies report, nearly Rs 30,000 crore was spent during the 2014 general election.
Real Estate has been a major stop point for black money, according to Ambit Capital’s report black money in India is more than Rs 30 lakh which is around 20% of the GDP. HDFC Chairman predicts real estate prices to come down medially however it will help curb unaccounted cash in the real sector. The effect will be reaching and immediate but will not shake up the sector in major way.
Demonetization – Surgical Strike against BJP’s rivals in Punjab and UP Polls?
Recent ban on high denomination notes is seen as a strike on black money nationwide. In his speech, PM Narendra Modi said that real estate sector, education and healthcare industries are the hotbeds of unaccounted money.
As far as elections are concerned, 2012 assembly polls saw unaccounted cash of more than 300 crores. Seizures of cash by Election Commission before any election are common and political parties are known for indiscriminate use of unaccounted money for votes.
Income Tax department reportedly found Rs 100 crore in currency notes in the basement of a mall in Noida that is owned by a liquor baron. The raid had taken place weeks before the Uttar Pradesh Assembly polls in 2012. This incident gave credence to rumors that massive amounts of money were being circulated with the elections round the corner.
Some can see this move as a surgical strike on opposition by Modi but it is infact the move that has elevated the PM’s stature against corruption. UP Election 2017
its a great, historic and game-changing move by PM Modi.
Taking such a strategic and bold move just before the UP elections is really hell of a task because this can easily be misunderstood by the majority of illiterate public of UP (no-offense to UPians but its true). This can cause BJP all sorts of trouble in election but PM Modi was still inclined to declare it preelections.
Whether BJP will have positive or negative effect on elections will depend on how we Indians take his decision of demonetization.
Those who understand it s importance, its excellent long-term effects on Indian economy will vote for BJP and that will add positive effect of this decision for BJP and Modi. But those who had black money, those innocent people who are mislead by political parties and sold media and the people who thinks of personal interest first than national interest, will vote against Modi.
So it can bring both; positive and negative effects on BJP.
Let's break up UP into three blocks to gauge the impact of demonetization.
Urban - BJP stands to gain here the most. From what I can tell young urban electorate is staunchly behind BJP. They see demonetization as not only a anti-corruption drive but also a modernization drive. So from a UP standpoint BJP will do well in large cities, especially with electorate who can quickly switch to cash alternatives. This is the vote the PM Modi has been shoring up on the past two days with his cash less statements. Semi Urban - This is where BJP will have a mixed performance. The switch to cash alternatives is relatively difficult and people felt more of the pinch
than the good folks in urban areas. But I would say that the overall tilt will be towards BJP. Rural - This group will make or break BJP. Most likely they will turn away from the BJP and BJP will try to make up the votes/seats in urban areas. This is where BJP will play the anti-corruption and nationalism card to shore up support. The main pain points will be visible in 2–3 months or so after the second wave of demonetization impacts become evident. If the impact is severe loss of jobs, then BJP will not do well in the rural belt. Overall I do not think this will backfire, but the rural folks will decide the UP elections. Punjab Election 2017
Money plays a great role in Punjab elections, the flow of money, depicts the impact of demonetization on the people. In Punjab Election 2017, People are in favor of the demonetization as it would control the flow of money, election committee makes sure that the flow of cash would be under control and the black money wont flow easily. 1. Political parties spends in Punjab hit
Come elections, and you could witness money being showered on voters. With demonetization, political parties with black money wouldn’t be able to woo voters.
We can hope, there will be fair voting in the upcoming state election of Punjab. 2. Drug peddlers in Punjab hit
The only state to have suffered the drugs menace is Punjab. The drug peddlers have run back into their rat holes post demonetization. The drugs business is the most important, in a shadow economy. The drugs business has completely stopped in the state, as transactions were done only in cash.
Goa Election 2017 Goa Election 2017 is concern the Goa is a tourist state, most of the people go Goa for vacation but due to the demonetization tourist industry is adversely effected in Goa, as far as elections are concern the citizens of Goa has positively accepted the plan of demonetization. Goa people has shown full support to Prime Minister Narendra Modi In working smoothly during the time of demonetization.
Uttarakhand Election 2017
The government of India has demonetized Rs 500 and Rs 1000 notes to get back the black money. The impact of demonetization is clearly visible on the elections of the five states. People are expecting positive results in the Uttarakhand Vidhan Sabha Election 2017, but it may get difficult to tackle the black money from the elections. As per the election commission, parties those who have organized the money wont face any problem but parties who have not organized it may find them in trouble. In Uttarakhand, tourism business has been affected as people are facing bit problem in cash, the committee has analyzed the effects of demonetization in Uttarakhand, but people living in Uttarakhand are witnessing changes in getting free flow of cash.
Pros and Cons of Demonetization Pros 1. Attack on Black Money Holders: •People who possess huge amounts of black money in hard cash are at a complete loss now. •Their black money in hard cash is now a pile of trash. • Now if a black holder want to deposit money in bank accounts than he/she has to show ID. •There will be 200% penalty on income tax amount.
2. Death Knell to Fake Currency Rackets • Most of the fake currencies used to be be in the denominations of Rs. 500 and Rs. 1000 . •By banning Rs. 500 and Rs. 1000 notes, Modiji has busted all these unethical rackets completely . •Now There Will be no use These Money. 3. End of Terrorist Funding •Huge sums of money especially in hard cash in the denominations of Rs. 500 and Rs. 1000 was used to fund Islamic terrorists , Naxalites and other non-state actors. •Now , these Organizations will suffer from shortage of funds . •Most of These terrorist ,Maoist Organization Used These Funds For Buying Arms and Weapons. •Buying arms is an extremely difficult task now after this ban . 4. Transparency • Online transaction = More transparency = Financial Intelligence Unit Will tack All Online transactions. •Now there Will be More Transparency In Real Estate Sector. 5. End of Huge Donations • Huge amounts of donation that is taken in the private education and healthcare sectors would be stopped . •Schools, engineering and medical colleges and hospitals ( private ones) used to take huge amounts of money as donations especially in the form of hard cash in the denominations of Rs. 500 and Rs. 1000 . •These money-minded people running these institutions won’t be able to make any easy money now . •Same applies to the real estate sector. 6. Towards A Cashless Economy
• While it is practically impossible to have a 100% cashless economy , the proportion of hard cash in the economy will decrease and our economy will get more digitized . •This will result in greater transparency . •Now government has put Some limitation for Cash Withdraw from bank Accounts. People Will go for online payments ,They Will Use PayTM Or other Online payment Companies For Buying goods or Making payments. •More Use of Debit and Credit Card. 7. Hawala Transactions End • Most Hawala transactions used to be carried out in the denominations of Rs. 500 and Rs. 1000 . •With this ban , Modiji has delivered a fatal blow to the unethical Hawala traders as they can’t trade anymore using denominations of Rs. 500 and Rs. 1000 . Cons 1. Rush at Banks • Banks are extremely over-crowded by people . •Peoples are forget everything else and throng to the places where the banned notes are being officially exchanged leading to a tremendous chaos . 2. Shortage of Money to Common People • There is Shortage of Money For Common people . 3. Stock Market • Due to currency being sucked out of the market coupled with Trump’s victory, the mood at the stock market was completely bearish . •Sensex lost 1600 points at open . This can adversely have a negative effect on trade in general . 4. Problem For House Wives • Many Indian housewives store money secretly so that they could be of help during times of financial crisis in their households .
•The accumulated money of our respected Indian housewives is of no use now until they exchange in the banks and post-offices . 5. Short Term Inflation • Due to shortage of money in the market , a short-term cost push inflation will occur . •The price of gold has already become sky high . •Prices of vegetables and fruits have also soared burdening the common man . 6. Marriage Season • Difficult For Those Families those have Weddings.
CONCLUSION Demonetization is a process by which a series of currency will not be legal tender.On 8th November 2016, Government of India had announced that from today onward rupees 500 and 1000 rupee note will not be a legal tender with the aim of restrict the black money, fake currency rackets, end of terrorist fundings etc. Demonetisation will be impact on five states assembly elections which will be held in 2017, it will helps in restricted the black money supply in the elections. Also effects the vote bank of BJP in UP and Punjab assembly elections. It will effects the electoral fundings of the parties and their strategies related to the expenses on the elections.
Bibliography www.moneycontrol.com www.timesofindia.com www.economictimes.com www.quora.com www.investopedia.com
www.Wikipedia.com
