International journal of basic and applied research ISSN (P) (E) Cosmos Impact Factor-5.

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1 Empirical Study about Impact of Demonetization on Gold and Sensex Price Dr.Rohidas B.Pawar Associate Professor and Head Arts and Commerce College, Nardana Dist.Dhule (MS) India Abstract After one and a half year of Demonetization, Indian Economy seems to have done away with all the negative impacts of Demonetization. The Demonetization was announced as a surprise on November 8, The demonetization announcement made the use of Rs.500 and Rs.1000 banknotes invalid past midnight of November 8. It was also announced that the new Rs.500 and Rs.2000 banknotes of the Mahatma Gandhi new series would be introduced in exchange for the old banknotes. The objective of demonetization as claimed by Government of India was to curtail the black money running as shadow economy and to stop the use of counterfeit cash to fund illegal activity and terrorism. The sudden nature of the announcement and the prolonged cash shortages in the weeks that followed created significant disruption throughout the economy, threatening economic output. The demonetization move was heavily criticized as poorly planned and unfair, and was met with protests, litigation, and strikes. It also impacted the Gold and Sensex. Demonetisation severely affected most of the cash-dependent sectors such as real estate, metal, consumer goods among others. It effects on gold prices were seen immediately after the announcement of demonetization. There was an immediate rush to buy this precious metal which lifted the gold prices to 3 year highs. With investors now fearing that the Income Tax Department will tighten the noose around the jewelers who are into money laundering using gold as the route, the prices of the precious metals started to witness a downward trend. Objectives and Methodology The present study describes the facts and figures regarding Gold and Sensex prices after demonetisation, which enable to understand its impact and provide the critical view on demonetisation. For this purpose the data collected from Gold MCX price and Sensex index price from various websites and keen comparison effected. The study provided indexation price of 37 days regarding Sensex and MCX gold before and after demonetization. The study also worked as comparative impact of demonetisation on Sensex and Gold. Analysis and Comparison Following table 1 shows the Sensex and Gold Price before and after demonetisation. Before Demonetization After Demonetization Date Sensex MCX Gold Date Sensex MCX Gold 147 Received: 8 August Revised: 15 August Accepted: 20 August

2 08-Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Received: 8 August Revised: 15 August Accepted: 20 August

3 15-Sep Dec Following table 2 shows the MCX Gold Trading and Gold Price before and after demonetisation. Date Before Demonetization Daily Traded Contract (In Lots) MCX Gold Price (In Rs.) Date After Demonetization Daily Traded Contract (In Lots) 149 Received: 8 August Revised: 15 August Accepted: 20 August MCX Gold Price (In Rs.) 08-Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Nov Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Oct Dec Sep Dec Sep Dec Sep Dec

4 27-Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Sep Dec Following graph shows Gold Price before and after demonetisation. Impact of Demonetization on Indian Economy in 2018 Economic Survey after careful review of Demonetization which was announced one and a half year back, has found that the cash-to-gdp ratio has stabilized. It suggests a return to equilibrium: 1. The Economic Survey says that India's GDP is set to grow at 7 to 7.5 percent in This is an increase from its prediction of 6.75 percent growth this fiscal year. 2. The Economic Survey has cited exports and imports data to claim that the demonetisation effect was now over. It claims that re-acceleration of export growth to 13.6 percent in the third quarter of Financial Year 2018 and deceleration of import growth to 13.1 percent is in line 150 Received: 8 August Revised: 15 August Accepted: 20 August

5 with global trends. This suggests that the demonetization and GST effects are receding. Services export and private remittances are also rebounding 3. According to the statistics released in the Survey, the Demonetization had led to Rs 2.8 lakh crores less cash (Equivalent to 1.8% of GDP) and Rs 3.8 lakh crores less high denomination notes (Equivalent to 2.5% of GDP) in the Indian economy. 4. The Economic Survey has also clarified that income tax collections have touched new high with demonetization and introduction of GST, From about 2 percent of GDP between and , they are likely to rise to 2.3 percent of GDP in , a historic high. Conclusion The announcement was sudden and unscheduled. It was a live television address at 8PM on November 8, In the days following the demonetisation, the country faced severe cash shortages with severe detrimental effects across the economy. People seeking to exchange their bank notes had to stand in lengthy queues, and several deaths were linked to the inconveniences caused due to the rush to exchange cash. As the cash shortages grew in the weeks following the move, the demonetization was heavily criticised by prominent economists and by world media. Jewellers sold 15 tonnes of gold ornaments and bars, worth around Rs 5,000 crore, on the intervening night of November 8 and 9 after the government demonetised Rs 500 and Rs 1,000 denomination notes only in Mumbai city. Indian stock market recorded its fourth straight weekly loss, with the Sensex sliding 669 points to end at a six-month low of 26, and the Nifty dropping over 222 points to 8,074 as fears of severe cash crunch gripped sentiment after demonetization of high value currency. The very next day of announcing the demonetization, the BSE Sensex and NIFTY 50 stock indices fell over 6%. The severe cash shortages brought detrimental impact on the economy. People trying to exchange their bank notes had to stand in lengthy queues causing many deaths due to inconvenience and rush. The sudden announcement has made adverse impact on business and economy. Instead of a growing economy India has become a standstill and no growth economy. It is fearedthat a fall of 2-3% in the GDP growth will be recorded coming year. Reference 1. Kumar and Bumra (2017), Demonetization in India: Pre and Post Effect on Indian Industry, International Journal of Scientific & Engineering Research, Vol.8, Issue-7, pp Kumar (2016), Demonetization and the Rule of Law, Economic and Political Weekly, Rajkumar and Shetty (2016), Demonetization: 1978, the Present and the Aftermath, Economic and Political Weekly, Burse (2018), The Impact of Demonetization on India and Indians, International Journal of Scientific and Research Publications, Vol.8, Issue-1, pp Received: 8 August Revised: 15 August Accepted: 20 August

6 5. Sundar (2017), Demonetization Scenario in India, International Journal of Research in Finance and Marketing, Vol. 7 Issue 6, pp Received: 8 August Revised: 15 August Accepted: 20 August