INTRODUCTION:

What is Demonetization? :-

Demonetization is a legal or constitutional process in which the government banned some existing currency notes. On 8^th November 2016 Indian government legally announced demonetization of 500 and 1000 rupees currency notes.

In the simple words, we can understand that demonetization means the existing legal currency notes replaced by the new announced legal currency notes.

Causes of Demonetization :-

Black money should control because of the act of demonetization. It is also helpful to control or break the chain of financial support to the terrorist activities and its organizations. Further, it is also helpful to make common people of nation become stronger against the fight of the corruption, black money and counterfeit currency notes.

India and Demonetization :-

Historical record suggested that earlier India faced two times demonetization. In the year, 1946 government banned 1000 and 10,000 rupees currency notes. Then after in the year 1954 in India 1000, 5000 and 10,000 rupees currency notes introduced by the government into the economic market. The year 1978 witnessed one more time the act of demonetization had taken on the 1000, 5000 and 10,000 currency notes and banned from the regular use. In Post- independent era after the year 1978, the major effective or called surgical strike as demonetization declared to fight against the black money on 8^th November 2016. Parallel economy paved and raw accounts Indian economy faced the Parallel economy and black money that not paid legally to the government and in business language, they settled with the paved and raw accounts while having business activities. Tax evasion is the fair act and not considered as immoral and unethical. This become the routine part of life therefore to get the rid of this rotten economic system the act of demonetization had taken place by the government. Further, it the intention of the government is also the break and demolished the chain of the evil activities like parallel economy, terrorist activities, counterfeit notes, weapons supplies and drugs smuggling.

Thorpe and Thorpe (2010) noted that demonetization is the act attacked on the exiting currency and make it inactive, which help to control over the black money and counterfeit notes.

As per the M. B. Ghodke’s Encyclopedic Dictionary of Economics, the norms of paper currency notes completely banished or rejected by implementing demonetization. Not only India but also many other countries are witnessed of the act demonetization. The intention of demonetization is to get the fair income from the taxes that help to develop the financial or economic development, to make the nation advanced in development and the uplift of the poor and downtrodden people of the nation. In short the demonetization is the clear and boost step towards economic development and progress of the nation.

The act of corruption, bribe, black market and hoarding, illegal business of the weapons, terrorism, smuggling, illegal drugs and other toxics supply, money launderings are the causes of the black money. Illegal property and income do not considered as fair process of income tax. There are many corrupt and irresponsible citizen of nation follow this evil process of black money that creates the hurdle of development and economic growth of the nation. Therefore, to make the process transparent, social justice and clear economic growth and development need the less use of cash currency. This cash currency is helpful to make black money and hoarding because the cash transaction is not under the trial of legal audit.

Negative Effect of Demonetization :-

After the declaration of the act, demonetization government failed to arrange the enough new currency in replacement of the old currency. The common people suffered a lot into the bank queue by suffering and sacrificing their daily business and job. This announcement of demonetization resulted into the disturbance to the common people especially the daily wages worker, farmers, homemakers, labors.

For the poor people the cash currency is the inevitable part to live the life. For living, the life on daily bases to purchase the product from the market required the cash. Demonetization, no doubt, is the historical and remarkable act to fight against the black money but to make implement this required proper boost planning so the common people should not suffer.

India is the developing country. The farm field is the prior base in the economy of India. There are many farmers who live in the rural area therefore they prefer the cash transaction. During the period of demonetization winter season is the prime season for the farmers and during this season, the farmers are in need of seeds to farm their land. To purchase the seeds they are in need of cash amount. The new currency notes are not enough available into the market so these farmers were suffered to farm their land without the seeds. In need of money farmers had to sell their grocery, vegetables with low cost and daily farm labors did not get their wages.

Most of the common businesses suffer due this demonetization. The demand into the market is not up to the mark or effective so this act directly affected to the production process of the business. The production graph is low during the month of November and due to this, less demand into the market resulted into the unemployment for the daily wages or the common people. to pay the cash amount to the workers company has shortage of cash amount and not only that the common people suffer to get exchange of 2000 new currency note into the market. People collected the 500 rupees note and do not make active into the market to purchase the product. These resulted into the less force of currency use. As per the Phisher formula MV=PT. When M is controlled by the system is directly affected to V. Therefore, P (price level) and T (quantity) affected. In India majority of the people are using the cash transaction therefore, we noticed the effect of demonetization in to the market place.

Effect on Consumptions :-

When the consumption of the common people remain less than it is resulted into the low so its effect we find on the less income, less saving, less production, less income and less demand. This is for the short time reference of production.

Effect on Bank Capital and Interest Rate:-

Short-term bank capital increased due to the demonetization because in these circumstances there is no form of saving deposit because people convert their old (cancelled) cash amount into the new currency. Therefore, the rate of interest is not decreased but arrested. Here the intention of the common people is not to get interest on their saving amount. Dr. Pangariya, Vice-Chairman of Niti-Ayog accepted that, the economic growth decreased and the situation remain same for four to six months due to the demonetization. These effects of this crisis remain until one year. During the year of 2016-17 the economic growth increase. In present situation, the bank has limited cash therefore the interest rate may be decrease. Therefore, the foreign and financial investment rate, increase, production rate, and growth rate are increased in compare of the previous year.

Base of G.D.P. :-

It is very essential to learn and know the various field of economy to know the economic effects of demonetization. Due to the lack of cash amount into the market farming, production and construction sites are in crisis. Gross value added of the country of these three fields covers more than 50%. The contribution of the Indian G.D.P covered more than 52% by the unorganized sector.

Social Effects :-

Social functions are now in control due to the lack of cash crisis. The marriages are the most awaited function in the family, due to the demonetization, this people have to control their expense and forced to celebrate in limited order. Aristocrats have to control their expense and change their budget in social functions. People are accepting the simplicity instead of excessive expenses. We notice this positive change in the society. This change is accepted not only for the short term period due to the current demonetization situation but in society these behavior of celebrating function accepted for making stability and equality in society.

The effect of demonetization noticed on the financial expense of the common people. India is the country where more than 90% of the transactions are in cash. It is noticed that more than 50% of the population of the country have no bank accounts and those who have do not practice the banking transactions. In foreign countries more than 67% to 70%, transactions are practiced by banking systems. While in our country, the banking transactions are at 2% only. The source of black money is the cash transaction in our country. But the situations are now changed due to the demonetization. People start practicing the do financial transaction with debit-credit card and with internet banking. The renaissance of cashless transaction is arising in India.

Cashless Arrangement :-

It is believed that the demonetization step of government may benefit to the economic system with cashless service. Cashless economy provides the advanced encouragement to electronic amount, develop the financial structure and develop the sense to make the digital transactions habit among the people make possible the cashless economy system.

Cashless economy means to do the maximum use of digital mode for transaction and less use of cash transaction. To use the less cash means make the practice of transaction with the help of debit card, credit card, internet banking and mobile phone app.

A Step Forward Towards Cashless Economy :-

Government has started the Vittiya Saksharta Abhiyan (VISAKA) to make aware the people about the cashless economic system. The prime purpose of this programme is to make people aware about using digital payment and encourage them to do the online mode of payment. Human Resources department suggested people to use cashless economy to do the transaction of money.

BHIM (Bharat Interface For Money) :-

The Prime Minister of India has launched the new E-wallet app on 30 December 2016. The prime purpose of this app is to make easy the economic transaction. This is not the payment application but the people can pay, debit or credit the amount from this app and the contact number of the account holder is linked with it.

Rupay :-

Rupay is the Indian form of credit or debit card and the same type of VIZA card or MasterCard. Rupay introduced by National Payment Corporation of India under the banner of Jandhan Yojana. Millions of people possessed the Rupay debit card so they can easily associated with cashless economy.

Aadhar Payment App :-

This application is linked with the biometric reader. Customer should enter his Unique Aadhar number and select the bank for transaction. The most essential thing of this app is that the user is utilized this app without the mobile facility.

Positive Effect and Profit of Demonetization and Cashless Economy :-

1. Money hording become less. The maximum amount of transaction credited or debited through saving account or current account. Capital investment increased because of saving.

2. Common people learn the banking literacy by opening the account into the bank with the purpose of deposit 500 and 1000 rupees notes. This process linked the people who never associated with the banking system.

3. Demonetization resulted into bring black money if these amount utilized in proper channel than it helps to uplift the downtrodden people and established the economic equality in the society.

4. People who do the male practice of black money caught red handed which help to established the corruption free society. Country should govern with the free corruption administration and political free atmosphere to work.

5. Black money exposed through the demonetization therefore corrupt industrialist, politician and officers may arrest and fiscal consumption becomes less. Vice-chairman of Niti Aayog Arvind Pangadhiya gave positive outcome that due to demonetization may help the government income and make the economy boost. Foreign investment is increased and for foreign investment corruption, free atmosphere is needed.

Demonetization is needed after every few years so the political corruption may control and unnecessary expense on election should control. To make economic shape effective it is very useful.

It is as transparent that due to demonetization the actual economic growth should measure rather the corrupt economic growth with black money. Nevertheless, the question is where is the development? Does the economic growth is high? However, the speed of development is slow and ineffective. High growth of economy may encourage the speed of growth if it remains slow then there is no help for the poor people and their growth. In real sense of measure out the country as India is developing which needed the true growth so it help to control the in equality between the poor and aristocrats? This change may help for happy index for the country.

If all the cash transaction will do with the medium of electronic app or platform then it will record, control and can be track. This will help to fill the difference of income tax by controlling black money and then it will help to control the terrorism funding, drugs distribution, counterfeiting notes and other male practices.

Indirect Benefit :-

To do the cashless transaction in India there are many benefits like:

Encourage to the entire financial participant :-

It is necessary for the family member to go bank but not enough to reach at bank because there are many rural areas where bank branches are limited and therefore this time of travel to one point to bank creates the problem for daily wages.

Financial transaction record is maintained due to the cash less transactions.

SUGGESTIONS:

· To support the cashless transaction method in India government should reform or provide the advanced technology and provide the assurance of safety with some policies.

· Make people tax free who have earn less than 50 lakhs per annum so the poor and middle class people get benefit and they can develop their life style and improve their living standard.

· Equal economic phase should decrease. Those who works in unorganized sites like industries contracts of land owner and many more have to pay the wages to their worker via bank transaction.

· Government has to think about the charges on credit card so the people can use digital transaction. Those who live under the poverty line with BPL Aadhar card linked with debit card and credit card with low rate of interest.

· School teachers, health workers, Rural Development Officers, Aanganvadi, and other works have encourage and make them aware about the digital transactions.

· Digital India Abhiyan should take at national level at least two or three times in a year.

· As a developing economy, India should produce the example of transparent and equal cooperative economic growth. This growth achieved by control the black money unorganized sectors.

REFERENCES:

1. B.K. Pattnayak, February 2017, Notebandhi, Rokad Arthtantra ane Vikas Yojna, P. 37,40,41.

2. Pro.Rani Nathni, May 2017, Vimudrikaran, Arth Sankalan P.176,177.

3. Kum.Renuka Chawda, July 2017, Vimudrikaran, Arth Sankalan P.17.

Received on 11.10.2023 Modified on 01.11.2023

Int. J. Ad. Social Sciences. 2023; 11(4):218-222.

DOI: 10.52711/2454-2679.2023.00034