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“Demonetization Impact: A case of Small Scale Traders”

Submitted

By,

Chetan Agrawal

Roll No- S04516COM030

Panchayat College Bargarh

1
Declaration

I hereby declare that the project report entitled as “analysis of the pros. & cons. of
demonetization” is the result of my own work & sincere efforts. This summer internship
project report is being submitted by me at Panchayat College, Bargarh, as the requirement for
the partial fulfillment of the course B.Com. & the report is not submitted to any other
educational institution for any other purpose.

I hereby, also declare that all the information included in this project are obtained &
presented in accordance with the academic rules & ethical conduct.

Date

Signature of the student

2
Acknowledgement

Words are indeed inadequate to express my deep sense of gratitude to all those, who have
helped me a lot to complete this project to the best of my abilities. Doing this project has
certainly been a unique & very productive experience on my part.

With a deep sense of gratitude & humble submission, I would like to thank my faculty guide
Dr. Ramesh Das ,Panchayat College, Bargarh, whose help, stimulating suggestions &
encouragement helped me in all the times of my summer training project.

I would like to express my gratitude to all persons, who made it possible for me to complete
my summer internship project by providing me their view with regards to the given topic as
answers to my questionnaire.

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Contents
Introduction:- 5
Literature:- 6
Objective of the study:- 7
Research tools & technique:- 7
Data & samples:- 7
Analysis:- 11
Descriptive statistics:- 12
Summery & conclusion:- 13
Annexure-1 14
Reference:- 15

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5
Introduction:-
Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs
whenever there is a change of national currency: The current form or forms of money is
pulled from circulation and retired, often to be replaced with new notes or coins. Sometimes a
country replaces the old currency with new currency.

The first currency ban In 1946, the currency notes of Rs. 1000 & Rs. 10000 were removed
from circulation. The ban really did not have much impact, As the currency of such higher
denomination was not accessible to the common people however both the notes were re-
introduced in 1954, with an additional introduction of Rs. 5000 currency.Rs.500 & Rs.1000
notes were reintroduced in 1934, & after 4 years in 1938, Rs.10000 notes were re-introduce.

The second currency ban That came in 1978, the then PM of India, Morarji Desai Announced
the currency ban taking Rs.1000, Rs.5000 & Rs.10000 out of circulation. The sole aim of the
ban was to curb black money generation in the country.

The latest currency ban In 2016, the Indian Government decided to demonetize the 500 &
1000 Rupee notes, the two biggest denominations in its currency systems; these notes
accountants for 86% of the country’s circulating cash. With little warning, India’s PM
Narendra Modi announced to the citizen on November 8 that those notes were worthless,
effective immediately & they had until the end of the year to deposits or exchange newly
introduced Rs. 2000 & Rs.500 Notes.

Pros:- Use of digital economy

Increase in tax payment.

Cons:- Hackers focusing India

Banks being dysfunctional.

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Literature:-
Arpit Guru & Shruti Kahanijow (2010) researcher analyzed the black money income and
analyzed that black money is spread everywhere in India up to a large extent which
continuously stashed towards abroad in a very large amount. The researcher also identified
how black money had caused menaces in our economy and in what ways it is used.

Ayash Yousuf (2017) stated that Demonetization is one of the major steps in fighting against
corruption, black money and terror funding. However, this decision was taken without proper
preparation and it adversely impacted the public. Without printing enough new currency
notes 86% of the currency notes were withdrawn thrashing all market transactions. Only
common people had to face problems exchanging their notes, not the people who were
targeted.
Rajakumar and Shetty (2016) have already presented an analysis of the demonetisation
exercise. In particular, they have provided a history of demonetisation in India, comparing the
current demonetisation with the one carried out in 1978. The earlier one, given the high
denominations of the currency demonetised relative to those normally used for transactions,
did not have any major impact on public life. Besides, the purpose of the earlier
demonetisation exercise was different from the present one. Quite apart from the historical
perspective, these authors come up with numbers linking currency and gross domestic
product (GDP) growth.

Kaushik Basu(2016) : Demonetization was ostensibly implemented to combat corruption,


terrorism financing and inflation. But it was poorly designed, with scant attention paid to the
laws of the market, and it is likely to fail. So far its effects have been disastrous for the
middle- and lower-middle classes, as well as the poor. And the worst may be yet to come,"
leading economist Kaushik Basu wrote in The New York Times.

Raghuram Rajan(2016): Reserve Bank of India's (RBI) former governor Raghuram


Rajan has said he had made it quite clear to the government that the demonetisation was
"not a good idea" and that its implementation was "not well-planned" since 87.5 per
cent of the currency was being demonetised. Rajan rejected the claim that the RBI had
not been consulted by the government before it went ahead with the demonetisation. He,
however, reiterated that the move to cancel 87.5 percent of the currency value was "not
a good idea".

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Objective of the study:-
In this paper, the study has focused the small retail and whole sales traders in Bargarh district.
Specifically, this study has taken the 25 traders for analysis of demonetization impact on
different dimensions. The following objective can written as follow.

 To study the demonetizations impact on small traders (Cycle trader, Technological


trader, Jewelry traders, Clothes traders, Grocery traders) in Bargarh town.

Research tools & technique:-

There are various types of research tools & techniques which are used in this project
& are as follows:-
 I asked 10 common variable questions from each & every traders i.e.
Liquidity, filling tax, long term impact, corruption, cashless economy, favor or
opposed, cash crunch, declining prices, invested in gold jewelers, social problems.
 There are various bar graphs for analysis & data sample which contains both
favorable & unfavorable impact. percentage(%),descriptive statistics, primary
data sources (face to face interview) method are used for each & every traders. The
trader consist of 5 common sectors i.e. (cloth, cycles, technological, grocery,
jewelries).

Data & samples:-


According to my Data & Samples I took “25 small traders with same 5 categories of Sectors”
i.e.,(cycle, technological, jewelry, clothes, Grocery). Each category consists of 5 shop. I’ll
ask each & every trader 10 common questions & they replay me honestly & faithfully. From
“Graphical representation & interpretation with sector wise” I’ll provide necessary data
& samples which are as follows:-

a. Liquidity:-

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5
4
3
2
1 Favorable
0 Adverse
h

ry

gy
cl
ot

er
ce

lo
Cy
Cl

el
ro

no
Jw
G

ch
Te

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Liquidity problem faced by every trader except jewelries sectors trader. Cloth sector 4 shop
are adverse & 1 shop is favorable. Cycle sector 4 shop favorable & 1 shop is adverse.
Grocery sector 3 shop is favorable & 2 shop are adverse. Technological sector 2 shop is
favorable & 3 shop are adverse.
b. Tax filing:-

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5
4
3
2
1
0
Favorable
h

ry

gy
cl
ot

er

Adverse
ce

lo
Cy
Cl

el
ro

no
Jw
G

ch
Te

Tax filing problem faced by every trader except jewelries & cycle sectors trader. Cloth sector
4 shop are adverse & 1 shop is favorable. Grocery sector 2 shop is favorable & 3 shop are
adverse. Technological sector 2 shop is favorable & 3 shop are adverse.
c. Long term impact-

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5
4
3
2
1
0
h

es

ry

gy
ot

er
cl

ce

lo
Cl

el

Favorable
Cy

ro

no
Jw
G

ch

Adverse
Te

All the sectors shops are said that Demonetization has a long term effects. They all are in
favor of Demonetization. Non-of-them are adverse from long term impact of demonetization.

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d. Corruption-

6
5
4
3
2
1 Favorable
0 Adverse
s

ry

y
he

er

og
cl

e
oc

el
ot

ol
cy

Jw
Cl

gr

n
ch
Te

All the sectors shop was in adverse due to the impact upon corruption. Every trader was said
that it can’t reduce the corruption. Non-of-them was in favor about corruption.

e. Cashless Economy-

6
5
4
3
2
1
0 Favorable
Adverse
h

ry

gy
cl
ot

er
ce

lo
Cy
Cl

el
ro

no
Jw
G

ch
Te

All the sectors shops are said that Demonetization has a enhanced cashless economy. They all
are in favor of Demonetization. Non-of-them are adverse from long term impact of
demonetization.

f. Against or Favor-

6
5
4
3
2
1 Favorable
0
Adverse
h

ry

gy
cl
ot

er
ce

lo
Cy
Cl

el
ro

no
Jw
G

ch
Te

Jewelries sectors all shops are in favor of demonetization. Cloth sector 3 shop are adverse &
2 shops are favorable. Grocery sector 2 shop is favorable & 3 shop are adverse.
Technological sector 2 shop is favorable & 3 shop are adverse.

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g. Cash Crunch-

6
5
4
3
2
1 favorable
0 adverse
h

ry

y
cl
ot

er

og
e
Cy
Cl

el

ol
ro

Jw

n
G

ch
Te

Jewelries sectors all shops don’t face any cash shortage due to demonetization. Cloth sector
4 shop are adverse & 1 shops is favorable. Grocery sector 3 shop is favorable & 2 shop are
adverse. Technological sector 4 shop is favorable & 1 shop is adverse.
h. Declining in Price

6
5
4
3
2 favourable
1
0 adverse
s

ry

gy
h

cl

er
ce
ot

lo
Cy

el
Cl

ro

no
Jw
G

ch
Te

All the sectors shop was in adverse in dealing of price. Every trader was said that due to
demonetization prices of product is declined.. Non-of-them was in favorable of pricing
scheme.

i. Purchase any Precious ornaments-

6
5
4
3
2
1 Favorable
0 Adverse
h

cle

ry

y
er

og
ot

le
Cy

oc
Cl

ol
el

n
Gr

Jw

ch
Te

Except cloth & jewelries sector other 3 sectors are purchased or invested in precious
ornaments. Cycle sector 3 shops are favorable & 2 shop is adverse. Grocery sector 4 shop is
favorable & 1 shop is adverse. Technological sector 2 shop are favorable & 3 shops are
adverse.

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j. Social Problem-

6
5
4
3
2
1 Favorable
0 Adverse
h

ry

y
cl
ot

er

og
e
Cy
Cl

el

ol
ro

Jw

n
G

ch
Te

Except Grocery & Technological sector other 3 sectors Faced social problem. Cycle sector 4
shops are favorable & 1 shop is adverse. cloth sector 4 shop is favorable & 1 shop is adverse.
Jewelries sector 3 shop are favorable & 2 shops are adverse.

Analysis:-
Favorabl Advers
Sectors e e
GROCERY 72% 28%
TECHNOLOGICAL 62% 38%
CYCLE 60% 40%
JWELLERY 86% 14%
CLOTH 58% 42%

100%
90%
80%
70%
60%
50%
40%
30%
20%
10% FAVORABLE
0%
ADVERSE
Y

AL

RY

H
ER

CL

OT
IC

LE
CY
OC

CL
OG

EL
GR

JW
NOL
CH
TE

From my analysis I found that which I mainly focused on 5 sectors that-

 Jewelries sectors get more benefit or more profitable sector due to demonetization.
 Other 4 sectors has faced much more adverse affect as comparisons to jewelries
sector.
 Our overall Indian market was crashed due to impact of the demonitisation.

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Descriptive statistics:-

a. Mean()= Sum of observation ÷ No. of observation

()= ∑

Favorable:- = 67% Adverse:-=33%

b. Median()= For all odd numbers of observation; ()=


Favorable & adverse= = 3rd term; is the median for both i.e., 60 & 40 respectively.

c. Mode= 3×median – 2×mean


Favorable= 3×60 - 2×67=180-134= 46
Adverse= 3×40 - 2×33=120-66=54

d. Range(R) = Highest value – lowest value


Favorable= 86-56=30
Adverse=42-14=28

e. Standard deviation(SD) =
Favorable= = = 120.3
Adverse== = 57.70

f. Variance
Favorable==14472.2
Adverse==3328.2

Summery & conclusion:-


Demonetization has a positive impact on various sectors of the economy. From my point of
view, I have mainly focused on the Five small sectors in our Bargarh district
(Technological, Clothes, Grocery, Jewelers, cycles).

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But at present, I found from my research & data sample that in the long
run, they have a positive impact on their trading due to demonetization. They don’t face any
kind of cash or liquidity problem, Due to circulation or rotation of money flawlessly in the
market.

 Number of Income tax return online filling was increased.


 Jewelers sectors have massively benefited.
 Almost every transaction takes place towards E-Banking or mobile wallets.
 GDP falls.
 Inflation was reduced.

It’ll increase in deposits with banks due to cancellation of bank notes of Rs.500 & Rs.1000,
has expanded the credit facility of bank, which are now in a position to reduce interest rate &
thereby increase the demand for loans in general & housing loans in particular.

 It leads India towards Cashless economy , due to this Indian sectors was digitalized.
Overall it helps the economy to rise in every sectors of India. Hence, India is back
again to be the fastest Growing Economy.
 But, for a short period the small traders faced some problem like, shortage of liquid
cash, Issuing Invoice, etc. Which are overcome automatically after a short period.
 The family that had marriage functions were largely affected due to cash transections
like paying for Tent, marriage, Band, food items, etc.

Limitations of the study-

 Sample size- As my sample size is too small, it will be difficult to find proper
relationships from the data as statistical tests normally requires a large sample size to
ensure a proper data.

 Lack of available data- A lack of data will likely require you to limit the scope of
analysis as my data size is small it is lacking.

 Lack of time & recourses- As the field study is done in a particular given time
period with respect to limited resources the study is not sufficient.

Annexure-1

Topic: Demonetisation Impact: Pros and Cons

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Targeted Sample Small Traders
Questions Response

a. Did you face any liquidity problem?

b. Did you face any difficulty in filling tax?

c. Has demonetisation any long term impact?

d. Has Demonetisation impact on corruption?

Has demonetisation contributed towards cashless


e.
economy?

f. Are you in favour or against demonetisation?

g. Have you faced any cash crunch?

Has demonetisation led to decline prices of your


h.
product?

Have you invested any sort of money on Gold and


i.
Jewellery during demonetisation?

Have you faced any kind of social problems


j. (Marriage, Agriculture, health etc) due to
demonetization?

Reference:-

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a. http://www.internationaljournalssrg.org/IJEMS/2017/Volume4-Issue3/IJEMS-
V4I3P111.pdf

b.

https://www.researchgate.net/publication/324952991_Impact_of_Demonetisation
_on_Indian_Economy_A_Critical_Study.

c. Dipankar Dasgupta. (2016, December 17). Theoretical Analysis of


Demonetisation. Economic and Political Weekly, Vol ll No. 51.

d. https://www.businesstoday.in/current/economy-politics/top-economists-are-
divided-on-demonetisation-who-said-what/story/241412.html

e. https://www.cnbctv18.com/finance/2-years-of-demonetisation-what-renewed-
economists-said-on-note-ban-1338011.htm

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