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A Survey of Demonetization of Rs 500 and 1000 Notes

Name of the students:

1. D. Nandini III TM2
2. B. Nageswari III TM2
3. S.K. Naseema III TM2
4. G. Sai Teja III TM2

Name of the Teacher Guide: Dr. T. Suneetha

A Survey of Demonetization of Rs 500 and 1000 Notes

The demonetization of 500 and 1,000 banknotes was a policy enacted by
the Government of India on 8 November 2016, ceasing the usage of all 500 (US$7.40)
and 1,000 (US$15) banknotes of the Mahatma Gandhi Series as legal tender in India
from 9 November 2016.The sudden move to demonetize Rs 500 and Rs 1,000 currency
notes is not new. Rs 1,000 and higher denomination notes were first demonetized in
January 1946 and again in 1978. The highest denomination note ever printed by the
Reserve Bank of India was the Rs 10,000 note in 1938 and again in 1954.

The announcement was made by the Prime Minister of India Narendra Modi in an
unscheduled live televised address at 20:00 Indian Standard Time (IST) on 8
November. In the announcement, Modi declared that use of all 500 and 1,000
banknotes of the Mahatma Gandhi Series would be invalid past midnight, and announced
the issuance of new 500 and 2,000 banknotes of the Mahatma Gandhi New Series in
exchange for the old banknotes. The banknotes of 100, 50, 20, 10 and 5 of
the Mahatma Gandhi Series and 2 and 1 remained legal tender and were unaffected by
the policy.

The government claimed that the demonetization was an effort to stop

counterfeiting of the current banknotes allegedly used for funding terrorism, as well as a
crackdown on black money in the country. The move was also described as an effort to
reduce corruption, the use of drugs, and smuggling. However, in the days following the
demonetization, banks and ATMs across the country faced severe cash shortages with
severe detrimental effects on a number of small businesses, agriculture, and
transportation. People seeking to exchange their notes had to stand in lengthy queues, and
several deaths were linked to the inconveniences caused due to the rush to exchange
cash. Also, following the announcement, the BSE SENSEX and NIFTY 50 stock indices
crashed for the next two days.
Initially, the move received support from several bankers as well as from some
international commentators. It was heavily criticized by members of the opposition
parties, leading to debates in both houses of parliament and triggering organized protests
against the government in several places across India. As the cash shortages grew in the
weeks following the move, the demonetization was heavily criticized by prominent
economists, such as Kaushik Basu, Paul Krugman, Amartya Sen and Steve Forbes
History of Indian currency demonetization.

2.History of Indias Demonetizes Currency

The Indian rupee (INR) is the official currency of the Republic of India. The rupee
is subdivided into 100 paise (singular paisa), though as of 2011 only 50 paise coins
are tender. The issuance of the currency is controlled by the India. The Reserve Bank
manages currency in India and derives its role in currency management on the basis of
the Reserve Bank of India Act, 1934. The rupee is named after the silver coin, rupiya,
first issued by Sultan Sher Shah Suri in the 16th century and later continued by
the Mughal Empire.

In 2010, a new symbol , was officially adopted. It was derived from the
combination of the Devanagari consonant (ra) and the Latin capital letter R without
its vertical bar (similar to the R rotunda). The parallel lines at the top (with white space
between them) are said to make an allusion to the tricolour Indian flag, and also depict an
equality sign that symbolizes the nations desire to reduce economic disparity. The first
series of coins with the new rupee symbol started in circulation on 8 July 2011. In a
major step to check undeclared black money, the Government of India on the 8
November 2016 announced demonetization of Rs 500 and Rs1000 banknotes with effect
from the same days midnight, making these notes invalid. Apart from combating black
money, the stated purpose is also to check fake currency (used to finance terrorism)
and corruption. A new redesigned series of Rs500 banknote, in addition to a new
denomination of Rs 2000 banknote is in circulation since 10 November 2016.The new
redesigned series is also expected to be introduced to the banknote denominations
of Rs1000, Rs100 and Rs50 in the coming months.

3. History and background

The sudden move to demonetize Rs 500 and Rs 1,000 currency notes is not new.

Rs 1,000 and higher denomination notes were first demonetized in January 1946 and
again in 1978.

The highest denomination note ever printed by the Reserve Bank of India was the
Rs 10,000 note in 1938 and again in 1954. But these notes were demonetized in
January 1946 and again in January 1978, according to RBI data.
Rs 1,000 and Rs 10,000 bank notes were in circulation prior to January 1946.
Higher denomination banknotes of Rs 1,000, Rs 5,000 and Rs 10,000 were
reintroduced in 1954 and all of them were demonetized in January 1978.

The Rs 1,000 note made a comeback in November 2000. Rs 500 note came into
circulation in October 1987. The move was then justified as attempt to contain the
volume of banknotes in circulation due to inflation.

However, this is the first time that Rs 2,000 currency note is being introduced.
While announcing currently circulated Rs 500 and Rs 1,000 notes as invalid from
midnight 8 Nov, Prime Minister Narendra Modi said new Rs 500 note and a Rs.
2,000 denomination banknote will be introduced from November 10.

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 1967-1979.

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 SatyamevaJayate truth alone shall prevail was
incorporated 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
1996 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 1,000 (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 1,000 and contained some
additional/new security features as compared to the 1996 MG series.

The Rs 50 and Rs 100 banknotes were issued in August 2005, followed by Rs 500
and Rs 1,000 denominations in October 2005 and Rs 10 and Rs 20 in April 2006
and August 2006, respectively.

4. Legal Facts about demonetization in India

The legal basis for the order demonetizing currency can be found in Section 26 of the
Reserve Bank of India Act, 1934. Under sub-section (2) of this Section, the Union
Government is given the power to declare that any notes issue by the Reserve Bank will
no longer be legal tender.

The only procedural requirement is that the Board of the RBI recommends the same to
the Union Government.

5. Objectives of the Study

1. To know the opinion of educated people about demonetization

2. To know the opinion of uneducated people about demonetization

3. To know the effect of demonetization in urban area

4. To find out the major problems faced by the people because of demonetization

6. Methodology of the Study

In this study the students have chosen Survey Method and Interview method.

7. Data collection

Keeping in view the nature of requirements of the study to collect all the relevant
information regarding the extent of awareness of the people opinion about
demonetization. Direct personal interview method with structured questionnaire was
adopted for the collection of primary data. Secondary data has been collected through the
various internet sites by surfing on internet and from the records available about

8. Sources of Data

The following are the methods of source of Data:

A.Primary data

Questionnaire was used to collect Primary data from respondents. The questionnaire was
structured type and contained questions relating to different dimensions of
Demonetization. The questions included in the questionnaire were open ended,
dichotomous and offering multiple choice.

B.Secondary data

Article on Demonetization taken from journals, magazines published time to time

Through Internet

9. Need for the Study

To determining economical growth rate of the country due to demonetization

People perception taken in to consideration about demonetization

10. Findings of the Study

Total sample of the survey is 40. Out of which 20 are literates and 20 are

60% of the literate people agreed that demonetization will curb black money,
corruption and terrorism.

Anti-corruption activists revealed that demonetization will have a huge impact on

black money and money laundering in the country.

Only 40% of illiterate people supported demonetization and believed that it will
help improve their lives in the future.

11. Conclusion

Surely this demonetization will help eradicate the 5% of the Black Economy which is put
in cash. Which might push the bank to decrease interest rate. Also we might move
towards digital economy. Demonetization process is like a two faces of a coin because
one side it will benefit the nation and other side it's going to create some temporary and
long term problems.

A. Benefits for the Nation

1. Possible to stop counterfeit currency using for the terrorism activity.

2. Black money: By demonetization of higher currency suddenly it will take out
illegally stored money from the holders.
3. Transparency: Moving towards digital economy may bring the transparency
in the system.
4. Easy monitoring: Digital payment easy to monitor cash flow.
5. Less chance of avoiding the taxes.
6. Transparency in the system will bring more invest from the foreign countries.

1. Losses to small vendors trade because of cash crunch (violation of article 19
of the Indian constitution).
2. Many people died because some hospitals not accepted old money and
rejected treat them.
3. Repeatedly changes in the rules and misleading to the people.
4. Many people do not have bank accounts in rural areas and hilly areas.
5. Lots of daily basis labours removed from the work.
6. Violation of article 14 (between holders and non-holders).

In order to bring more transparency and accountability in the system it's necessary
to go with digital economy, but we can't fully depend on digital economy we need some
percentage of money for daily uses.