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, 2016. 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
08-Nov-16 27591.14 29997 09-Nov-16 27252.53 30021 07-Nov-16 27458.99 30100 10-Nov-16 27517.68 30017 04-Nov-16 27274.15 30553 11-Nov-16 26818.82 29478 03-Nov-16 27430.28 30481 15-Nov-16 26304.63 29382 02-Nov-16 27527.22 30623 16-Nov-16 26298.69 29411 01-Nov-16 27876.61 30288 17-Nov-16 26227.62 29200 30-Oct-16 27930.21 30071 18-Nov-16 26150.24 28990 28-Oct-16 27941.51 30057 21-Nov-16 25765.14 29172 27-Oct-16 27915.9 29957 22-Nov-16 25960.78 29171 26-Oct-16 27836.51 29887 23-Nov-16 26051.81 28911 25-Oct-16 28091.42 29960 24-Nov-16 25860.17 28794 24-Oct-16 28179.08 29849 25-Nov-16 26316.34 28649 21-Oct-16 28077.18 29961 28-Nov-16 26350.17 28764 20-Oct-16 28129.84 30044 29-Nov-16 26394.01 28766 19-Oct-16 27984.37 30019 30-Nov-16 26652.81 28415 18-Oct-16 28050.88 29881 01-Dec-16 26559.92 28129 17-Oct-16 27529.97 29782 02-Dec-16 26230.66 28275 14-Oct-16 27673.6 29721 05-Dec-16 26349.1 28196 13-Oct-16 27643.11 29870 06-Dec-16 26392.76 27944 10-Oct-16 28082.34 29813 07-Dec-16 26236.87 28043 07-Oct-16 28061.14 29567 08-Dec-16 26694.28 27896 06-Oct-16 28106.21 29730 09-Dec-16 26747.18 27701 05-Oct-16 28220.98 29955 12-Dec-16 26515.24 27843 04-Oct-16 28334.55 30090 13-Dec-16 26697.82 27710 03-Oct-16 28243.29 30874 14-Dec-16 26602.84 27746 30-Sep-16 27865.96 31007 15-Dec-16 26519.07 27130 29-Sep-16 27827.53 31257 16-Dec-16 26489.56 27308 28-Sep-16 28292.81 31079 19-Dec-16 26374.7 27392 27-Sep-16 28223.7 31116 20-Dec-16 26307.98 27262 26-Sep-16 28294.28 31407 21-Dec-16 26242.38 27103 23-Sep-16 28668.22 31356 22-Dec-16 25979.6 27152 22-Sep-16 28773.13 31412 23-Dec-16 26040.7 27186 21-Sep-16 28507.42 31289 26-Dec-16 25807.1 27241 20-Sep-16 28523.2 31046 27-Dec-16 26213.44 27431 19-Sep-16 28634.5 31069 28-Dec-16 26210.68 27539 16-Sep-16 28599.03 30999 29-Dec-16 26366.15 27810 148 Received: 8 August Revised: 15 August Accepted: 20 August
15-Sep-16 28412.89 31082 30-Dec-16 26626.46 27700 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-16 20135 29997 09-Nov-16 31140 30021 07-Nov-16 13386 30100 10-Nov-16 15837 30017 04-Nov-16 12722 30553 11-Nov-16 18109 29478 03-Nov-16 16769 30481 15-Nov-16 11739 29382 02-Nov-16 13101 30623 16-Nov-16 7819 29411 01-Nov-16 9475 30288 17-Nov-16 8421 29200 30-Oct-16 1371 30071 18-Nov-16 10458 28990 28-Oct-16 12113 30057 21-Nov-16 6499 29172 27-Oct-16 8662 29957 22-Nov-16 5894 29171 26-Oct-16 11067 29887 23-Nov-16 11784 28911 25-Oct-16 12634 29960 24-Nov-16 6783 28794 24-Oct-16 17502 29849 25-Nov-16 11635 28649 21-Oct-16 12276 29961 28-Nov-16 8280 28764 20-Oct-16 13032 30044 29-Nov-16 9842 28766 19-Oct-16 11689 30019 30-Nov-16 13746 28415 18-Oct-16 13552 29881 01-Dec-16 8188 28129 17-Oct-16 11284 29782 02-Dec-16 7394 28275 14-Oct-16 14679 29721 05-Dec-16 8734 28196 13-Oct-16 12938 29870 06-Dec-16 5926 27944 10-Oct-16 9212 29813 07-Dec-16 6982 28043 07-Oct-16 20100 29567 08-Dec-16 6085 27896 06-Oct-16 13593 29730 09-Dec-16 7105 27701 05-Oct-16 14096 29955 12-Dec-16 4682 27843 04-Oct-16 19697 30090 13-Dec-16 5521 27710 03-Oct-16 9742 30874 14-Dec-16 5202 27746 30-Sep-16 20506 31007 15-Dec-16 10965 27130 29-Sep-16 17182 31257 16-Dec-16 8719 27308 28-Sep-16 12507 31079 19-Dec-16 4963 27392
27-Sep-16 16103 31116 20-Dec-16 7429 27262 26-Sep-16 9546 31407 21-Dec-16 7503 27103 23-Sep-16 10589 31356 22-Dec-16 7136 27152 22-Sep-16 15723 31412 23-Dec-16 4358 27186 21-Sep-16 14026 31289 26-Dec-16 1742 27241 20-Sep-16 11038 31046 27-Dec-16 7479 27431 19-Sep-16 10268 31069 28-Dec-16 5247 27539 16-Sep-16 10549 30999 29-Dec-16 7387 27810 15-Sep-16 14669 31082 30-Dec-16 6489 27700 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 2018-19. 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
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 2013-14 and 2015-16, they are likely to rise to 2.3 percent of GDP in 2017-18, a historic high. Conclusion The announcement was sudden and unscheduled. It was a live television address at 8PM on November 8, 2016. 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 26,150.24 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.266-274. 2. Kumar (2016), Demonetization and the Rule of Law, Economic and Political Weekly, 19-21. 3. Rajkumar and Shetty (2016), Demonetization: 1978, the Present and the Aftermath, Economic and Political Weekly, 13-17. 4. Burse (2018), The Impact of Demonetization on India and Indians, International Journal of Scientific and Research Publications, Vol.8, Issue-1, pp.150-156. 151 Received: 8 August Revised: 15 August Accepted: 20 August
5. Sundar (2017), Demonetization Scenario in India, International Journal of Research in Finance and Marketing, Vol. 7 Issue 6, pp.79-86. 152 Received: 8 August Revised: 15 August Accepted: 20 August