Impact of Demonetization on Indian Economy

...

For instance transport services,Kirana stores ,fruits & vegetables and other perishable goods will face the contraction of demand which will result into the fall in product prices and other thing which will be affected is cash supply for purchasing .To provide solution of such issue is to do purchasing on credit basis and this will positively impact retailer and other sector and with this instead of fall in prices there can be rise in prices and liquidity position will be covered up.

According to the scenario there will be two major changes :Firstly there will be increase in tax collection in short time and secondly there will be emergence o currency substitutes.

3.3 Now let’s discuss Medium term impact of demonetization on economy:

Under this the effects on the currency within economy will be highlighted.If entire currency gets replaced in the economy the scenario will be different but if entire currency not get replaced it will leads to some affects like compression due to currency fall and secondly bank deposits which are not being withdrawn.

Like Finance Minister Arun Jaitley ,”Bank deposits will increase and they will have more money to support the economy.

In India CRR is 4% while SLR is 22%.1In determining the credit creation only CRR is taken into account and the additional credit creation can be 25 times the amount of money deposited in the banks as a result of proposed demonetization.2

3.4 How demonetization will affect the business in 2017?

This question is yet debatable and its work is in progress.The claimed objective of demonetization is root up the entire black money and move towards digital mode i.e cashless transactions .To promote cashless economy some lucrative offers are being taken like 0.75% reduction in prices of petrol and diesel through digital mode of payment and 0.5% discount on railway tickets.Now this measure being called “less- cash”strategy

In India bloomberg data shows the share of cash in the volume of consumer transactions is 98% and much of the transactions are in the rural area

There is short term set back no doubt in such point.As per data available GDP rate reduced from 7.6% to 7.1% but in surety of recovering the above decline in upcoming year 2017-18.

3.5 Implications of my study?

Following points will be covered in my study taking future in consideration:

Do really demonetization has impact on the Indian economy?

Do the effect really being realized by consumer sector as per demand factor?

Further critical analysis of financial statements for some selected companies really to consumer goods?

Research Methodology

For my study to be practically realized taken 200 a sample size and applied chi square test to test the hypothesis of my study.Under this there two dependent variables i.e income and education and two independent variables i.e age and gender.In near about village survey was conducted among people and questionnaire was used as mode to get the outcome.As per result outcome the value was not found in the chi square table which prove that my hypothesis was true about my study

Formula applied X2=(Oi --Ei)2/Ei

As per sample size and calculation based the value of chi square test does not exist within chi square table.So it proves my hypothesis to be true.

(1)

Major Findings & Conclusion

Hypothesis of my study is that demonetization has no impact on Indian economy till time.

Alternative hypothesis says it has impact.

The demonetization step prove to be the biggest shock for the Indian economy.The impact of this measure is extended both to short term as well as medium term as per details but its long term impact yet to be analyzed as the time progressed.While exact facts and figures are not available but these are estimated facts and possibility impacts till now.

There is a possibility of spurt in the deposits of banks.On the whole the impact of demonetization will be debated and analyzed as the financial year progressed.

Description of Remaining Work

Under this topic lots of work to be done as it is the most highlighted topic of the year 2017.As the time progressed impact of demonetization will be measured and I would like to do the analysis of financial statements of some selected companies under consumer goods sector

Expected Contributions of your PhD Work

As there is direct impact on demand factor of consumer goods because of denomination and less cash availability.As research progressed it will contribute in larger amount to the consumer goods section and help to analyze the demand patterns,use of other modes of transaction and critical analysis of profitability factor.

References

The times of India study

Economic times study

Forbes.com

Bloom-berg data

RBI notifications

The Indian express study

CNN and Times Now debates