DEMONETIZATION: IMPACTS ON INDIAN ECONOMY

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1 DEMONETIZATION: IMPACTS ON INDIAN ECONOMY MR HARPREET SINGH Assistant Professor in Economics, Panjab Universitry Constituent College Sikhwala, Sri Mukatsar Sahib ABSTRACT The government has implemented a major change in the economic environment by demonetising the high value currency notes of Rs 500 and Rs 1000 denomination. These ceased to be legal tender from the midnight of 8th of November People have been given up to December 30, 2016 to exchange the notes held by them. The proposal by the government involves the elimination of these existing notes from circulation and a gradual replacement with a new set of notes. The demonetisation was done in an effort to stop the counterfeiting of the current banknotes alleged to be used for funding terrorism and for cracking down on black money in the country. The present study has been deals with the announcement of demonetization of currency notes (500, 1000) its needs and problems faced by the society and its immediate positive and negative impacts, prospective impacts on economy. Secondary data has been used for study which is collected from different newspapers and websites. Hence, it can be concluded that apart from disturbing daily lives of the common citizen, but it will brings constructive implications for the whole economy in long run. It is too early to even imagine the impact on all sections of society and parts of the economy. The advantages of this move, though, will be felt only in the long-term. While formal modes of payments such as debit and credit cards, net-banking and digital wallets is increasing and should get a boost, this will take a long time to be felt simply because the proliferation of these products is still low among the middle classes and the poor, for whom cash is still the predominant mode of transactions. The government s move is daring, undoubtedly this is Modi s biggest move since he was elected prime minister. While the intention of Govt. is clear but impact is yet to be seen. Keywords: Denomination,Demonetisation,Economy,Currency, Exchange of Currency,GDP. INTRODUCTION Demonetization is a generations memorable experience and is going to be one of the economic events of our time. Its impact is felt by every Indian citizen. Demonetization affects the economy through the liquidity side. Its effect will be a telling one because nearly 86% of currency value in circulation was withdrawn without replacing bulk of it. As a result of the withdrawal of Rs 500 and Rs 1000 notes, there occurred huge gap in the currency composition as after Rs 100; Rs 2000 is the only denomination. Phenomenal changes have taken place in the economy during the past decade and a half. There has been considerable diversification in favor of services sector in total gross domestic product (GDP), which obviously absorbs higher amounts of currency. Liberal economic policies included sizeable reductions in marginal tax rates, impetus for trade, easing of controls on foreign direct investment, as also portfolio investment in share markets, liberalization of commodity trading, and opening up of large numbers of organized retail outlets. All of these have created liberal economic environment which has given impetus to people to hold large amounts of cash. Over time, due to persistence of inflation, the value of the rupee has also eroded. In such an environment, the authorities responded by reintroducing high denomination notes for ease of trade and general economic activities. Until the introduction of `500 notes in October 1987 and reintroduction of `1,000 notes in November 2000, `50 and `100 notes had held in the market. In about 65% of the notes in circulation were in the form of `50 and `100 notes and by , their share dwindled to just about 10%. The `500 and `1,000 notes have increased in share: `500 notes from about 25% in to 47% in , and `1,000 notes which were issued in grew to 38% in Thus, the two together accounted for as much as 86% of the total 45

2 notes in circulation, which showed that transactions in India have been preponderantly through these two denominations. The demonetisation was done in an effort to stop the counterfeiting of the current banknotes alleged to be used for funding terrorism and for cracking down on black money in the country. Following are the announcement by the Prime Minister the governor of the Reserve Bank of India (RBI), Urjit Patel made a press release with details on the procedure for exchanging the 500 and 1000 rupee notes that are currently in circulation. On 8 November, other than the notification that these denominations will be discontinued, there were a few other relevant announcements such as. Citizens will have until December 30, 2016 to tender the discontinued banknotes at any office of the RBI or any bank branch and credit the value into their respective bank accounts. For immediate cash needs, the discontinued banknotes of value up to 4000 per person can be exchanged for the new banknotes over the counter of bank branches from 10 November 2016 by furnishing a valid ID proof. All ATMs will remain closed from midnight on 8 November The ATMs will resume functioning from 11 November 2016 upon their recalibration to dispense bank notes of only 50 and 100 rupee denominations. Banks have been advised to provide all cash withdrawal transactions at their ATMs free of cost to their customers till 30 December Cash withdrawals from ATMs will be restricted to 2000 per day per card up to 18 November 2016 and the limits will be raised to 4000 per day per card from 19 November All banks will remain closed to the public on 9 November EARLIER DEMONETISATIONS OF INDIAN CURRENCIES The recent move to demonetize the currency is not new. Here are some of the earlier demonetisations of Indian currencies: The highest denomination note ever printed by the Reserve Bank of India was the Rs. 10,000 note in 1938 and again in But these notes were demonetised in January 1946 and again in January 1978, according to RBI data. Rs 1000 and Rs currencies were in circulation prior to January Higher denomination banknotes of Rs 1000, Rs 5000 and Rs were reintroduced in 1954 and all of them were demonetised in January The Rs 1000 currency made a comeback in November Rs 500 note came into circulation in October The move was then justified as attempt to contain the volume of banknotes in circulation due to inflation. Bank notes in Ashoka Pillar watermark series in Rs 10 denomination were issued between 1967 and 1992, Rs 20 in 1972 and 1975, Rs 50 in 1975 and 1981 and Rs 100 between The banknotes issued during this period contained the symbols representing science and technology, progress and orientation to Indian art forms. In the year 1980, the legend Satyameva Jayate truth alone shall prevail was integrated under the national emblem for the first time. In October 1987, Rs. 500 banknote was introduced with the portrait of Mahatma Gandhi and Ashoka Pillar watermark. Mahatma Gandhi (MG) series banknotes were issued in the denominations of Rs 5, (introduced in November 2001), Rs 10 (June 1996), Rs 20 (August 2001), Rs 50 (March 1997), Rs 100 (June 1996), Rs 500 (October 1997) and Rs 1000 (November 2000). The Mahatma Gandhi Series 2005 bank notes were issued in the denomination of Rs 10, Rs 20, Rs 50, Rs 100, Rs 500 and Rs 1000 and contained some additional security features as compared to the 1996 MG series. 46

3 NEED OF DEMONITISATION Black money was a key agenda for BJP during election campaigns. But people were disappointed when there was no major step taken by the current government. Now when PM Modi has declared the demonetization of Rs 500 and Rs 1000 notes, a positive vibe has been spread throughout the country. It has been seen that ratio of tax collection to GDP is abnormally low. While our economy is grew by 30% and circulation of currency increased by 40%,High denomination notes increased by 76% and 109% respectively, than it cause suspicion that much of this was being hoarded as black money.the move of demonitisation is also expected to weed out large catches of black money, to break the grip of corruption and black money. The Govt.decision to demonetize Rs.500 and Rs.1000 currency notes will also push India towards cash less economy. IMMEDIATE POSITIVE IMPACT ON ECONOMY Black money was a key agenda for BJP during election campaigns. But people were disappointed when there was no major step taken by the current government. Now when PM Modi has declared the demonetization of Rs 500 and Rs 1000 notes, a positive vibe has been spread throughout the country. Govt.of India undertook this decision to solve many major menace in our system, and to bring long lasting impacts on our economy.we cannot say about long term impact, but this move entail numerous immediate benefits for the Indian economy. Demonetization may have caused some trouble to honest citizens, but later on it will benefit our citizens. Like PM Modi said, the honest are sleeping peacefully while the corrupt and wrong doers are on sleeping pills. PM Modi, in one single move has managed to tackle many serious issues. Here are some of its positives: Maoists hit Chhattisgarh, Telengana, Andhra Pradesh and Orissa had 413 (2014) witnessed deaths in the North Eastern states with Assam being the highest; these deaths are a result of the Maoist activities. According to sources, Maoists had stashed over Rs.7000 crore at their dumps in Bastar region. Now all of that is nothing but a bundle of papers. The demonetisation move has hit them hard, and their activities have totally come to stand still. No stone-pelting in J&K Yes, you heard it right!!! Since demonetization, incident of stone-pelting on armed forces has not been reported. The citizens of Kashmir have lauded this bold move by the NDA government, as first time in decades; the valley has remained peaceful for last more than 40 consecutive days. Burning schools stopped in J&K Education gives the ability to think, question and analyse to a person, which helps them differentiate between the right and wrong. The separatists and religious hardliners would never want this to happen- people were hired to do violent acts, burn schools and spread fear amongst the people of Kashmir. With their hoarded, ill-gotten wealth turning into garbage they have been left motionless. School burning incidents have stopped and just a day before, approx. 54,000 students appeared for their exams. Corrupts burning cash Honest citizens are ready to do their bit for the country (to face hassles of currency exchange) and face this move with patience, as they know this bold move will make India- a world power. The corrupt people, who had stashed un-accounted cash in huge amounts, are spending their nights, burning their cash. Arhar dal crashes to Rs.80/kg in UP With demonetization fear has gripped the black-marketers hoarding grains and pulses in their granaries. As government has promised more action in the coming days, stocks of arhar dal has increased in the market, and prices have crashed. According to a report, Arhar dal is being sold at Rs.80 per kilo, (down from Rs.120-Rs.130) in U.P. 47

4 Kirana shops/panwalas installing debit card machines Demonetization has only instilled better sense in people. Going cashless, is one such example. People have started installing debit card machines and Paytm for cashless transactions, thus improving transparency in market- Kirana shops, Panwalas, Sherbet sellers, auto rickshaws etc. are examples where such cashless transactions are being done. People have realised the benefits of having a cashless economy and like the government, the citizens too, are working towards the betterment of the country. Municipalities making record recoveries of house tax For years, the municipalities were running behind people to pay their arrears on house tax, but in vain. Post demonetization, defaulters are paying their pending taxes, increasing cash coffers of the municipal corporations. The municipalities have made record recoveries of house tax this year, all thanks to the bold move of demonetizing larger bills. Electricity companies making huge record recoveries of past arrearslike Municipalities, electricity providers are making huge recoveries of past arrears. The government has allowed acceptance.people can deposit old currency notes at many (public service providers) places, as electricity provider offices fall in that list, people are paying off their arrears with the demonetized currency notes. Medicine shops making big sales As medicines and drugs fall under essential commodities list, one can use demonetized currency notes at medicine shops. People are flocking medicine shops and stocking up on medicines, in a bid to get rid of their old currency notes. Delhi Metro smart cards sales increase One could expect less traffic in Delhi for a few months, as people have bought season tickets with their old currency. The air quality in Delhi has worsened, breaking the record of poor air quality in years; with lessened traffic one can expect some respite. Many businessmen recovering past dues as old as 4 years and getting advance for new orders Many business men deliberately don t make early payments, and continue doing business on credit. By doing so, they infuse the profits in their production cycle to double their profits- and most of it is in cash. The demonetization move has forced them to get rid of their hoarded black money. Now, they are not only paying their dues with interest, but are also making advance payments. Huge opportunities for mobile wallets Digitization is the way to future. Post demonetization steep rise in the use of mobile wallets have been reported. The private sector online payments have reported a significant rise in the usage patterns by their users. Oxigen Wallet witnessed increase in the load money transactions by up to per cent by the first half on Wednesday, and India s largest mobile payments platform Paytm also recorded 435 per cent increase in traffic on its platform, with add money transactions increasing by 1000 per cent. In India most of the transactions are done through cash. According to various data released: less than 5% of all payments happen electronically. The ratio of cash to gross domestic product is one of the highest in the world 12.42% in 2014, compared with 9.47% in China or 4% in Brazil. The number of currency notes in circulation is also far higher than in other large economies; India had billion currency notes in circulation in compared with 34.5 billion in the US. If we manage to tap even half of the cash transactions, then India s GDP will reach to new highs. Banks plush with funds.rs. 12 lakh crore banked in 40 days!!! Cost of funds reduced for bank As people are depositing their old currency notes, banks have reported huge surge in their cash coffers. According to a report, banks have cumulatively collected more than Rs.12 Lakh Crore in last 40days. In the coming days the amount is only going to increase. This will bring down the interest rates for loans. Many have already slashed their interest rates. All property deals involving black money in jeopardy Bayana- An Indian term used to denote the token money given to the landlord to informally freeze negotiations on a particular property, after the 48

5 initial terms and conditions have been formalized. Such payments are done in cash, and not documented. Property deals involving black money have been hit hard; the builders (construction) lobbies are one of the largest hoarders of black money. One may witness a slowdown in the realty market, but in future they wouldn t get involved in such activities. Property prices come down by 25% With the black money being driven out from the market, the prices of unsold units will witness a slump in prices, the property prices are expected to come down by 25%. This decision will help institutionalize the real estate sector bringing more transparency in the Indian real estate industry. This step would give the Indian real estate sector more credibility making it more attractive to the foreign as well as domestic investors. Housing prices could witness downward pressure, helping revive demand in the sluggish housing segment (this will give much needed bloodline to the sector) It will help the common man by putting an end to the artificial increase in Real Estate, Higher Education and Healthcare transactions bringing them within the reach of the common man. Democracy deepened. All castes/creeds standing in same queue. Demonetization has brought all of us in one big frame. People are standing in queues and helping each other irrespective of one s caste or creed. The real essence of democracy is being witnessed. Fake currency rackets hit A recent study commissioned by the NIA showed that 250 in every 10 lakh notes in circulation in India are fake, with FICN (Fake Indian Currency Notes) bearing a face value of Rs 400 crore in circulation at any given point in time. (Reported by TOI) The study stated that FICN worth Rs 70 crore was being infused into the Indian market every year. The fake currency racketeers have been left with trash, and with high security features in the new Indian currency notes; making a counterfeit is impossible. Political parties spend in Punjab/UP hit In coming elections, and you could witness money being showered on voters. With demonetization, political parties with black money wouldn t be able to flatter voters. We can hope, there will be fair voting in the upcoming state election of Punjab and UP. Drug peddlers in Punjab hit The only state to have suffered the drugs menace is Punjab. The drugs business is major bottleneck for high-quality economy. The drugs business has completely stopped in the state, as transactions were done only in cash. Increased Income Tax Revenue: It would be an overstatement to say that all black money holders will deposit all of their stored cash into bank accounts. But they will also not let their hard-earned cash to become worthless paper. And whatever they will do it will convert their black money into white, at least for once. Someone is surely going to pay income tax on that amount. It will drastically increase the revenue generated from tax. Hard Money to Digital Money: Though, it is the first of its kind, but we may have to face these surgical strikes on black money in the future too. This will give some time to people to understand the need of digital money in the current era. We have seen some inspiring pictures where vegetable seller is accepting money via PayTm. India is changing. POTENTIAL BENEFITS OF THIS MOVE Govt. of India anticipates so many positive impacts from demonetization.major potential impacts are spelt out as under. Money coming from informal economy to formal economy will increase liquidity for banks which further decrease interest rate and help for banks to handle their NPA. Reduced interest rate will boost investment. It will give momentum to our economy and reflect in the form of growth in GDP & per capita income of our country. Land prices will fall and people will be able to afford houses. 49

6 Parallel economy is mainly based on cash transaction that's why has hit hard by recent demonetization. Some money of parallel economy is going to come in formal economy and will work as a boost for main economy. Finance of terror and other unsocial organization will destroy overnight because of sudden invalidation of cash. It will be hard time further for parallel economy to sustain with limited cash availability. GST will effective from next year and combination of GST and demonetization will increase the growth rate of Indian economy. Cashless transaction will increases in upcoming time and it make ready India to go for fully cashless country. Demonetization is beneficial step for main economy and will be helpful to curb the corruption and black money. IMMEDIATE NEGATIVE IMPACT: Heavy Deflation than inflation Initially there will be heavy deflation as people who have earned money through illegal means such as smuggling, corruption would be afraid to declare the money as they might be prosecuted by Govt/Income Tax Dept.There will be a lot of people who have a lot of cash, legally earned, which they will deposit it in the bank. Now the bank with more deposits can do more lending. Credit (loans) will become easier and interest rates may come down. More loans given out increases broad money supply and creates inflation. But this will happen slowly, not over-night. Deflation and Inflation will balance out each other in future Inconvenience to common people who will start running to the nearby bank to exchange the 500 and 1000 currency notes. Very difficult for more than half the population who are not well versed with the card transactions. This move deeply impacts the working sections of society: drivers, maids, cooks, electricians, plumbers. Anybody who provides services in the informal sector and depends on monthly or bimonthly cash payments. How do you expect a chai wallah to leave his business and stand in a queue to deposit these notes in bank? What will happen to the common man who finds out that the note he is having is a fake one? How is the Govt going to handle such situations? The small businesses will be affected at least in the shorter run. Jan Dhan scheme, UPI/digital payment stack and payment banks are still in the nascent stage. It will be a long time before rural India moves to completely cashless transactions. In the shortterm, people in rural India who have a significant amount of Rs 500 and Rs 1000 notes, but no official form of identification will have a tough time in exchanging their notes. Most of the rural and urban poor in India are un-banked i.e. they don t have bank accounts. These people- the migrant labourers, the landless workers, the potters, the contract labourers, the street vendors, rickshaw pullers, and female workers keep the money stashed at their homes. The big fish will be left out whose black money is in the form of foreign currency, gold and stashed away in tax havens. People will have to become slaves of banks and government officials. Long queues will be a common sight from nowadays. See the long queues? All middle class and poor people can be seen in queues 50

7 Stock Market would crash - People without having a clear idea about the situation would try to save their fortunes and would start pulling out their money from the stocks that are going to be hit by this storm. People with huge piles of paper currency are going to lose their calm - The day will start with Trade unions and other such unions coming together to protest and do marches. Decline in the GDP - the GDP of India will decline heavily as confusion and tax obstacles in trade will hamper growth. Loss to common People: - Many people have fake currency that it unintentional or earned by hard work and they are using it without knowing it. Now banks will refuse to take fake money it direct loss for innocent people. Rise in corruption: - Imagine this, you have Rs. 1 lacs go to exchange, cashier said sab nakli hai be! line se hat baki bhi khade hai,then you are screwed, whether it is fake or not. While local politicians and powerful people will exchange their notes easily by paying bribes and CAs will facilitate them by finding all loopholes. CAs will be biggest beneficiaries as people have to employ their expensive services. Loss of Tax Payers Money: - Rs 500 printing costs Rs 2.5 and Rs.1000 costs Rs 3, (approx ).Multiply it by number of notes present in India ;now government has to pay this money from taxpayers. Inflation: - Due to above price rise will occur. All basic goods will cost more. Now understand that since most of the black money is stored in Rs. 500 and Rs currency notes. Since these notes cannot be tendered anymore, the consumption demand will go down drastically (how will people buy jewellery, property and other high value items without black money?). As consumption demand will hit a new low, the economy will essentially find itself in a recession. By this time, government will also start another round of voluntary disclosure scheme and fill its coffers with unprecedented disclosure taxes and fines. Big time tax evaders can easily use multiple users bank accounts to distribute the cash and evade detection. Not all black money is in cash form: when you ban notes with bigger denomination it surely have catastrophic effects on black held in cash form. But the question here how much money are stored in cash form? I don t think large amount of money would be stored in cash.here, I want to give an example of a IAS couple caught few years back for disproportionate asset. That couple had disproportionate asset of 350 crore but they only had 3 crore in cash. That means amount in cash was less than 1%!!! So, effect of this decision surely would be limited. Migration of High income high quality individuals to tax free countries like middle East, Singapore. Foreign tourists, daily wage laborers and middle class are facing huge losses Today I saw many foreigners being harassed and suffer as were unable to purchase anything and they have no clue as to what should be done with their 500 \1ooo currency notes. Farmers are the worst affected Farmers fear missing out on sowing time as their life saving are in cash and there is a widespread panic among farmers, who were preparing for the next Rabi season. This is the sowing season for the Rabi crop in some parts of the country and the harvesting season for the Kharif crop. Most of the purchases and sales in this segment of the economy are carried out through cash. With the elimination of cash from the economy, sale of kharif crop would be difficult unless the crop is sold on the promise of payment in future. Given the limited bargaining power of the farmer, the price they can realise for the crop can be adversely affected. On the other hand, in the sowing activity, people would not get access to the inputs required since most of the inputs are now purchased from the market unless they seek access to credit from the supplier. In other words, with demonetisation, there would be a significant strengthening of the informal sector credit market in the rural economy. Further, if there are 51

8 agents who do not get access to credit from the informal sector agents, their sowing activity and hence their incomes in the next season would be adversely affected. Thus, in spite of a good monsoon in large parts of the country, the farmer might not get the benefits Was done to infuse cash into banks to make up for bad loans by tycoons. What if I told you that PSU Banks are in a miserable condition right now, and need immediate infusion of money to shore up their lending capacities? What if I told you that few weeks back credit rating agency Moody s had stated that Indian Banks require Rs lakh crore capital infusion? EXPERTS AND ECONOMISTS VIEWS AGAINST AND FOR DEMONETIZATION: Here in following Para showing the views of experts against and for demonetization Experts and Economists who are against demonetization: Amartya Sen: Leading economist; Noble Laureate; recipient of the Bharat Ratna Move is a failure the intended targets know how to avoid the trap: It is hard to see how. This will be as much of a failure as the government s earlier promise of bringing black money stacked away abroad back to India (and giving all Indians a sudden gift what an empty promise!). The people who are best equipped to avoid the intended trap of demonetisation are precisely the ones who are seasoned dealers in black money not the common people and small traders who are undergoing one more misery in addition to all the deprivations and indignities from which they suffer. Dr. Manmohan Singh: Former Prime Minister; eminent economist; former RBI governor Overall opinion: Speaking at the Rajya Sabha, Dr. Singh has called demonetisation an organised loot, a legalised plunder and a monumental mismanagement. He even said that the National income would fall by 2 per cent, which in his mind was an underestimate. Kaushik Basu: Leading economist; Senior Vice-President and Chief Economist at The World Bank Cannot wipe out black money; hoarders have already found loopholes: Anyone seeking to convert more than Rs 250,000 must explain why they hold so much cash, or failing that, must pay a penalty, Basu wrote in The New York Times. This requirement, he wrote, has already spawned a new black market to service people wishing to offload: Large amounts of illicit cash are broken into smaller blocks and deposited by teams of illegal couriers Arun Shourie: Former economist at the World Bank; recipient of the Padma Bhushan and Union Minister Will demonetisation weed out black money? Not really, because the owners of black money have intelligently converted all that money into tangible and intangible assets: This is not a strike on black money, and the reason for that is that those who hold this black money or who have black assets, they don t hold them in cash. One percent of Indians own 53 percent of the total assets in India. 10 percent own 85 percent. Now these are the rich fellows, who would be having an even larger proportion of black money. They are not going to put money under the mattress! They are holding it abroad and there also it s not dollars in gunny bags, it s property! Maybe jewellery, maybe other assets, maybe stock markets. On Cashless economy : While Modi has continuously advertised e-transactions and said that demonetisation will pave a way towards India becoming digitally modern, Shourie said that those most affected were farmers, whose usual transactions are small. You think in the agricultural sector, daily wages would be paid through debit cards? Or that poor fellow [a farmer] will use a credit card to buy vegetables? He only earns for that day! EXPERTS AND ECONOMISTS WHO ARE FOR DEMONETISATION: Arun Jaitley: Current Finance Minister of India; Senior Advocate, Delhi High Court Eventually, the government will be able to invest more money in agriculture and social sector: A lot of money that operates in the shadow economy will now become a part of the banking structure itself. Banks will have 52

9 a lot more money to support the economy. Private sector investment, which was so far lacking, will now get back into the economy. The banks which were struggling because of the NPA problem will have a lot more money to lend for agriculture, infrastructure sector, social sector, trade and industry. Bibek Deb Roy: Leading economist; Member of the Niti Ayog, a policy think-tank for the GOI On why the notes are different sizes, which deter quick production and circulation of the notes: There have been several arguments pitched by economists as to why the different denomination notes vary in sizes. The difference in sizes are delaying the printing and therefore taking longer to circulate within the country. Mr. Deb Roy argued that the notes vary in sizes because the sizes inform those who are visually impaired about what denomination they are holding: You must realize that there are ordinary, sensible people who also happen to be disabled. For them the way to distinguish between currency notes is often in terms of size Therefore accept that the currency notes have to be different in size! Note: The argument that the size needs to be different for visually disabled doesn t hold water. This is because the RBI has introduced two features in the notes which make it easier for the visually impaired to distinguish between the denominations. First, the RBI has introduced the new notes which can be read in Braille. It was a feature the Finance Minister, Arun Jaitley had mentioned in his budget speech in 2014: The government will print currency notes with Braille-like signs to assist visually challenged people. Two, the notes also have angular bleed lines, which are elevated markings that appear on the upper right and upper left frame of the notes. The number of bleed lines are unique to each denomination, and are therefore easy to distinguish between. Different sizes therefore, don t really matter. Arvind Virmani: Leading economist; Former India s representative at IMF; Former Chief Economic Adviser, GOI Useful method; secrecy was a per-requisite: This is a useful method of flushing out black money, given that a large percentage of cash holding is in these two denominations. The manner in which it was implemented is not surprising such actions are always secret till announced, so that insiders do not take advantage of the information at the cost of the outsiders, he told The Wire. However, he agreed it would have a negative impact on the small businesses: How it will affect requires a deeper study, but the first thing one knows is when you demonitise such a large proportion of currency, the immediate effect is a collapse of retail trade in goods and services, Virmani told Business World adding that this effects how quickly you replace the transaction demand. He said the currency needed for everyday transactions have has to be replaced quickly. The longer that is delayed, the more the negative effect. Surjit Bhalla: Chairman, Oxus Investments, a Delhi-based economic research/advisory firm; Former Professor at Delhi School of Economics; Previously worked at the World Bank Calls it a bold step on PM s part: Bhalla wrote in The Indian Express that, There should be no question that this BJP policy is bold and courageous. The trading community has long been identified as the BJP s core constituency and Prime Minister Narendra Modi has gone against this powerful support group. So let us give Modi a considerable amount of credit for taking a bold step for the country genuinely in the name of the nation. D Subbarao, former RBI GovernorThe recent decision of the Government of India to delegalize high denomination currency was motivated, as per the press release issued by the Government to eliminate black money which casts a long shadow of parallel economy on our real economy and to curb counterfeit currency, which is used to finance terrorism and drugs and as a medium for money laundering. CONCLUSION On the bases of studies in different newspapers, magazines, jounals & watching news in different channels and observing the current scenario in economy. It revealed that for short term negative impacts 53

10 are more than positive.but in long run it will benefit our economy and general masses at great extent. Our PM also appeal us to kindly keep patience and cooperate the system, it will create problem for you for 50 days.aferward I am responsible to compensate you. As PM said for long term positive impact will be outweigh than the short term negative impacts. I don't mind my wallet getting fatter, as the wallets of corrupt politicians and businessmen are getting lighter! #byebyeblackmoney REFERENCES "Aun Jaitley dismisses rumours of nano GPS chip on Rs 2000 note". Zee News. 9 November "Govt's demonetisation move fit for country's security, development: HC". Economic Times. 10November Retrieved 10 November "Here is what PM Modi said about the new Rs 500, Rs 2000 notes and black money". India Today. 8 November Retrieved 9 November "PILs in Supreme Court against making Rs 500, Rs 1000 notes illegal". India Today. 10 November Retrieved 10 November "Rs 500 & 1000 currency notes banned: Congress raises questions against Narendra Modi govt's shocking move". India.com. 8 November Retrieved 9 November "Demonetisation of Rs.500 and Rs. 1000: Who says what". The Hindu. 8 November Retrieved 9 November "Govt demonitises Rs 500, 1000 notes: Here is how India Inc reacted". Indian Express. 8 November Retrieved 9 November "Rs 500, 1000 notes pulled out: How Twitter reacted". Times Of India Blogs. 8 November Retrieved 8 November Demonetization to fight corruption & black money,employment News,November 19-25,2016 Retrieved 10 December