THIS PRESENTATION IS ALL ABOUT THE NOTE BANDI SCHEME; ITS PROS AND CONS AND HOW FAR IT HAS BEEN SUCCESSFUL IN REALITY.

1. Critical Analysis of
“DEMONETIZATION”
PRESENTED BY
SWEETY & TANVEER
OF MBA FINAL SEM
GEC PANIPAT

2. CONTENTS
 INTRODUCTION
 HISTORY
 OBJECTIVES
 IMPACT
 CONCLUSION & FINDINGS

3. INTRODUCTION
 Demonetization is the act of stripping a currency unit of its status as legal tender.
 Demonetization is necessary whenever there is a change of national currency. The
old unit of currency must be retired and replaced with a new unit of currency.
 It is the withdrawal of old currency of any denomination in circulation with the
replacement of new notes.

4. LEGAL TENDER
 Legal tender is any official medium of payment recognized by law that can be
used to extinguish a public or private debt, or meet a financial obligation, the
national currency is legal tender in practically every country.
 A creditor is obligated to accept legal tender can only be issued by the national
body that is authorized to do so, such as the U.S. Treasury in United States and the
Royal Canadian Mint in Canada.

5. HISTORY OF DEMONETIZATION
 The French were the first to use the term demonetize, in the years between 1850-
1855.
 India has not demonetized its currency for the first time. Indian currency had been
demonetized earlier:
1. first time on 12th January 1946,
2. second time on 16th January 1978, and
3. Now on 8th November 2016.

6.  In the first time, the measure did not succeed, as by the end of 1947, out of a total
issue of Rs. 143.97 crores of the high denomination notes, notes of the value of
Rs 134.9 crores were exchanged. Thus, notes worth only Rs. 9.07 crores were
probably demonetized, not having been presented.
 In the second time, The Finance Minister H.M. Patel in his budget speech on 28
February 1978 announced Note-Bandi for the objective of controlling illegal
transactions.
 Demonetization was done by the first non congress government on India by
Morariji Desai- led Janata Party in January 1978.

7. o In January 1946, banknotes of 1000 and 10000 rupee were withdrawn and new
notes of 500, 1000 and 10000 rupee were introduced in 1954. The Janata Party
coalition government had again demonetized banknotes of 500, 1000 and 10000
denomination to curb black and counterfeit money in 1978.
o On 8th November 2016, notes of Rs 500 & 1000 were declared null and void by
PM Modi.

8.  In 2012, the Central Board of Direct Taxes had recommended against
demonetization, saying that “demonetization may not be the solution for tackling
black money or economy, which is largely held in the form of Benami properties,
bullion and jewelry”.
 On 28th October 2016 the total banknotes in circulation in India was Rs. 17.77 lakh
crore (US$260 billion). In terms of value, the annual report of Reserve Bank of
India of 31st March 2016 stated that total bank notes in circulation valued to Rs.
16.42 lakh crores of which nearly 86% was Rs. 500 and Rs. 1000 notes. In
of volume, the report stated that 24% of the total 90,266 million banknotes
in circulation.

9. Countries where demonetization has
happened!
 Singapore (1945)
 Fiji (1969)
 USA (1969)
 Britain (1971)
 Ghana (1982)
 Nigeria (1984)
 Myanmar (1987)
 Soviet Union (1991)
 Australia (1996)
 North Korea (2010)
 Pakistan (2015)

10. OBJECTIVES OF SCHEME
 MAIN OBJECTIVE:-
1. ATTACK AGAINST BLACK MONEY & ITS HOLDERS!
2. CONTROLLING CORRUPTION AND!
3. FIGHT AGAINST COUNTERFIETING CURRENCY AND TERROR FUNDING!
OTHER OBJECTIVE:-
1. MOVE TO ENCOURAGE CASHLESS ECONOMY.
2. DIGITALIZATION

11. IMPACT OF DEMONETIZATION
 Demonetization undoubtly affects many sectors and most important is the
common man of the country.
 Its impact is felt by every Indian citizen. Demonetization affects the economy
through the liquidity side.
 . As a result of the withdrawal of 500 and 1000 Rs notes, there occurred huge gap
in the currency composition as after Rs.100; Rs.2000 is the only denomination.

12. Main Points
 Liquidity crunch (short term effect)
 Welfare loss for the currency using population
 Consumption will be hit
 Loss of growth momentum
 Impact on bank deposits and interest rates
 Impact on black money
 Impact on counterfeit currency
 Demonetisation is not a big disaster like global banking sector crisis of 2007; but at the
same time, it will act as liquidity shock that disturbs economic activities.

13. Liquidity Crunch
 Liquidity shocks means people are not able to get sufficient volume of popular
denomination specially Rs 500. This currency unit is the favourable denomination in
daily life.
 It constituted to nearly 49% of the previous currency supply in terms of value. Higher
the time required to resupply Rs 500 notes, higher will be the duration of liquidity
crunch. Current reports indicate that all security printing presses can print only 200
million units of Rs 500 notes by the end of 2016.
 Nearly 16000 mn Rs 500 notes were in circulation as on end March 2016. Some
portions of these were filled by new Rs 2000 notes. Towards the end of March
approximately 10000 million units will be printed and replaced. All these indicate that
currency crunch will be in our economy for the next months.

15. Impact on Consumption
 When liquidity shortage strikes, it is consumption that is going to be adversely
affected first.
 Consumption of Goods and services in major sectors have fallen sharply like
agriculture, tourism, fisheries, real estate.
 Consumer spending activity fell to a near halt. Consumers are refraining from
making any purchases except essential items from the consumer staples,
healthcare, and energy segments. Activity in the real estate sector, which includes
a lot of cash and undocumented transactions, slowed down significantly,
Metropolitan and Tier 1 cities reported up to a 30% fall in house prices.

17. Impact on Black Money!
 “All Cash is not Black, and All black money is not Cash”
 Only a small portion of black money is actually stored in the form of cash. Usually,
black money is kept in the form of physical assets like gold, land, buildings etc.
hence the amount of black money demonetization depends upon the amount of
black money held in the form of cash and it will be smaller than expected.
 The question is where is Black Money????

18.  No big fishes were caught. In fact there was hardly any effect on black money
holders!
 Swiss Bank Account haven’t been freezed yet, neither has govt made the names
public of the Swiss Bank Account Holders!
 The basic objective of the scheme has not been achieved.
 Vijay Malya and like wise many tax evaders and loan defaulters are roaming free
while the comman had to suffer in ATM queues !
 RBI still doesn't tell us how much demonetized currency was actually black.

19. Terror Funding & Counterfeiting Currency
 What is counterfeiting Currency?
 Answer: Counterfeit Currency is imitation currency produced without the
legal sanction of the state or government. Its also referred as fake currency!
 According to National Investigation Agency (NIA) the value of fake currency
is about Rs 400 crores. Which means out of 90.26 billion Indian currency
notes in circulation, no more than 0.63 million i.e 0.0007% i.e 7 in every
million were detected fake.!
 Only 16 out of every 250 notes are detected in India , a report from RBI
revealed “INDIAN EXPRESS”

20. Impact on GDP
 With note ban govt neutralized 86% of the currency impacting informal sector
which employs 94% of the labour force.
 Small Business entities or SME’s have been severely dented. Above 90% of
transactions are made in cash so by note bandi sectors like construction, real
estate, agriculture, shops and trading enterprises have faced the havoc.
 Growth Rate has dipped post demonetization and its expected dip further as
estimated by IMF, AIMO, Economic Survey of India.
 Informal sector of economy is the worst hit of this scheme.
 20 lakh job loss in the month of December & January reported.

21. Some valid questions??
 Q1 Has the terror Funding stopped??
 Q2 What is the possibility that newly designed notes and printed wont be copied
or counterfeited and pumped in the market?
 Q3 Are the new notes having proper security features such as latent image, fibre
mark or water mark??
 Q4 where is the micro chip in the new notes which was being told via news
channels and social media?

22. The Facts
 Post Demonetization there have been many terror related incidents across the
country from J&K to Chhattisgarh, Assam, Manipur etc.
 The terrorists who have been caught alive had brand new currency notes.
 Mere changing of size of notes and color is not going to end terror funding and
corruption.
 The govt refused the RTI being used for political funding. Which means nobody
can know where the parties in India are getting funds from while its expecting a
common man to declare its income and assets!
 50% of India’s ATMs were dysfunctional when this scheme was announced by PM
but Govt and RBI was unaware of it..said by Mr. Vivek Debroy member of NITI
AYOG

24.  Growth in the Indian economy remained solid in the quarter from April to June 2016 (the latest
available). In India, a financial year begins in April and ends in March of the following year. The
previously mentioned quarter is the first quarter of fiscal 2016–2017. During that period, the GDP
(gross domestic product) rose 7.1%, while the GVA (gross value added) rose 7.3%. The relationship
between the GDP and GVA is:
 GDP = GVA + taxes on products – subsidies on products
 The base year for calculating the GVA is 2011–2012.
 The fall in economic activity due to demonetization could last from two to three quarters. As a
result, GDP and GVA growth in the quarters from September to December 2016 and January to
March 2017 could be significantly lower than previous years. Some bounce back should be seen in
the first quarter of fiscal 2017–2018. In the medium term, the Indian economy can grow
considerably after curbing the debilitation caused by counterfeit money and an increase in
economic activity.

25. Cashless and Digital Payments
 Up until this campaign, India was an incredibly cash-centric economy. Cash
accounted for upwards of 95% of all transactions, 90% of vendors didn’t have card
readers or the means of accepting electronic payments, 85% of workers were paid
in cash, and almost half of the population didn’t even have bank accounts. Even
Uber in India accepted cash — the only country in the world where this option is
available — and “Cash on Delivery” was the preferred choice of 70% of all online
shoppers.
 India lags behind other emerging nations in internet access and smartphone
ownership. Across the 21 emerging and developing nations surveyed in 2015
(including India), a median of 54% have internet access and 37% own
smartphones. In India, however, only 22% have internet access and only 17% have
a smartphone.

28. Findings And Conclusion
 CONS
 1. No preparation by Govt to implement the scheme.
 2. Basic objectives of the scheme still not accomplished.
 3. Credibility of the RBI has been seriously dented beyond repair.
 4. Slow printing of new notes.
 5. Seriously hated major sectors of economy.
 6. Will take many months for economy to recover.

29. BENEFITS
 Major blow to tax evaders.
 Cleansing of economy from old fake
notes.
 Move towards digital paymets.
 Safe banking transactions rather than
illegal transactions.
 More collection of taxes.
 Revenue Generation.
 Better growth rate in future as expected in
future.
 Bold step in a country like india.