On the evening of November 8, 2016, the cancellation of monetization was unexpectedly announced. An economic study on India published shortly before the 2018 total budget was submitted to Parliament highlighted all the negative effects of the demonetization of the rupee. And 0.1000 rupee/banknotes are used up. However, analysis from India and abroad shows that the demonetization in November 2016 did not meet expectations and lasted longer than originally expected.
Experts believe that even in order to promote digital currencies, the government does not have to withdraw 86% of all currencies from circulation. Research shows that someone grabbed a very small black coin. In 2017, the Reserve Bank of India issued a report on waste banknotes, in which 99% of banned banknotes were returned to the banking system, refuting the government’s claim that waste banknotes would eliminate black money and counterfeit money. Demonetization is a wrong decision, because 99% of the currency is returned to the system, which shows one of two things: either the amount of black money in the cash is very small, or the government cannot effectively demonetize, which is why The money in all black 500 and 1000 rupees banknotes was flushed back to the banking system.
An economic study after careful analysis of the demonetization announced a year and a half ago found that the ratio of cash to GDP has stabilized, indicating that the balance has been restored: An economic study shows that India’s GDP will rise to 7%. It grew by 7.5% during 2018-19, thus exceeding the forecasted growth of 6.75% for the current fiscal year.
The economic survey cited import and export data to demonstrate that the demonetization effect has ended. In the third quarter of fiscal 2018, export growth accelerated to 13.6%, and import growth slowed to 13.1%. This shows that the impact of demonetization and GST is declining. Service exports and private remittances are also gaining momentum. According to statistics released by the survey, demonetization has led to a reduction of 2.8 million rupees (equivalent to 1.8% of GDP) in funds, which is a reduction of 3.8 million rupees banknotes (corresponding to 2.5% of GDP) in the Indian economy.
The economic survey also clearly pointed out that with the abolition of monetization and the introduction of goods and services tax, income tax collection has reached a new record: “Between 2013-14 and 2015-16, it will reach about 2% of GDP. In 2017, It is expected to reach 2.3% of GDP. 18 years, historical record”.
The economic report also clearly pointed out that with the introduction of non-monetization and goods and services tax, income tax collection set a new record: “In 2013-14 and 2015-16, it will increase by about 2% of GDP, and it may increase in 2017. An increase of 2.3% of GDP will rise. 18 years, a historic record.” On November 8, 2016, Indian Prime Minister Narendra Modi (Narendra Modi) announced the de-monetization of all 500 and 1,000 rupee banknotes. The Mahatma Gandhi series of non-monetization announcements used 500 and 1,000 rupee banknotes, which were invalidated at midnight on November 8. Also announced new 500 rupees and 500 rupees.Exchange old banknotes for 2000 banknotes of Mahatma Gandhi’s new series.
As the Indian government said, the goal of abolishing monetization is to reduce the use of black money as an underground economy and prevent the use of counterfeit currency to finance illegal activities and terrorism. The suddenness of the announcement and the continued lack of funds in the past few weeks. This caused a severe shock to the entire economy and put production at risk. The banknote scrapping measures were criticized as improperly planned and unfair, and triggered protests, lawsuits and strikes.
The announcement came suddenly, without a plan. This is a live performance at 8pm. In the first few days after the banknote abolition order on November 8, 2016, the country faced a severe cash shortage, which had catastrophic consequences for the entire economy. Due to the inconvenience caused by the eager exchange of money, there were several deaths in the long queue. As cash shortages intensified in the weeks following this move, leading economists and global media have severely criticized demonetization.
The government’s banknote abolition policy is hailed as a major financial reform aimed at curbing black money, corruption and counterfeit banknotes. All non-evil practitioners welcome the use of banknotes as the right measure. The abolition of monetization is to help India. Demonetization helps the government to track black money, cash will stop flowing, and taxation will be better used for development plans and public welfare undertakings.
One of the greatest achievements of the abolition of monetization is the severe suppression of terrorist activities because it stopped financing terrorism, which was previously motivated by the influx of unreported cash and large amounts of counterfeit currency. Stop, because activities are easily tracked and funds can be seized by the authorities. Demonetization aims to prevent the operation of the parallel economy through the circulation of counterfeit currency, as the ban on 500 and 1,000 rupee banknotes will eliminate their circulation.
Unregistered cash can be deposited into Pradhan Mantri Garib Kalyan Yojana after paying 50% tax. The money will be stored in the bank interest-free for 4 years, but the amount will be refunded after 4 years. Public banks that have been hit hard by the deposit crisis and have run out of funds, after holding a certain amount of reserves in accordance with the guidelines of the Reserve Bank of India, suddenly increased a large amount of funds that can be used for future financing and loans.
Individuals who opened Jan Dhan accounts will now use their accounts and be familiar with banking. The money deposited in these accounts can be used for the development of the country. Taxes related to the implementation of the banknote scrapping policy are used for activities in the country. Demonetization has turned the country into a cashless society. Many people, even in remote rural areas, are starting to make cashless payments. This measure promoted the development of banking activities. Bank channels and small savings have become national treasures. The high image of rising prices and inflationary trends facing the Indian economy is assuming a downward trend and making low-income groups affordable.
The day after announcing the de-monetization, BSE Sensex and NIFTY 50 stocks fell more than 6%. The massive cash shortage has had a negative impact on the economy. Bustling.
The sudden announcement had a negative impact on business and the economy. The Indian economy did not grow, but stagnated and did not grow. Some people worry that GDP growth will drop by 2-3% next year. Agriculture-based economy Farmers are hardest hit by lack of money, especially smallholders and marginalized farmers, who rely heavily on cash to buy seeds, fertilize and pay for crops, borrow water for irrigation and other related farm tools for planting activities.
Since even the branches of small banks cannot get enough funds during the planting season, farmers cannot repay their agricultural loans, which aggravates farmers’ problems and leads to poor agricultural development. Production next year. The real estate industry has stagnated, and there is still a shortage of buyers for the completed and unfinished inventory without buyers. This leads to poor cash flow, which leads to a drop in demand. The abolition of banknotes has made the situation chaotic. The crowd was delayed because of the circulation of the new currency. Unable to pay low-paid workers in cash, small employers went bankrupt.
Poor government planning has also exacerbated the problems of low-income ordinary people. The 2,000 rupees bill did not find many stakeholders because it is difficult to balance when buying basic necessities such as vegetables, milk, bread, or paying for smaller expenses such as taking a bus. Although the number of 100 rupee banknotes was insufficient, the 500 rupee banknotes went on sale very late. On the one hand, the cost of printing new currency is high, and on the other hand, managing hundreds of millions of rupees from the old currency has become a huge expense. Banknotes are easier to hide and can be used to store black money in a smaller space.The entire opposition refused to abolish monetization and called the decision a strict law.
After the de-monetization, the prices of basic consumer goods such as beans, fruits and vegetables have fallen sharply, thereby reducing the rate of inflation in the months following the de-monetization.
One of the main effects of demonetization in 2016 is that more and more people are using digital payments as part of their lives and turning to a cashless economy. The details of the growth of such digital transactions from January 2016 to August 2017 show that OIL transaction volume increased from Rs 7,086 crore to Rs 1,255 crore; debit card transaction volume increased from Rs 2,328 crore to Rs 2,700 crore; credit card amount increased from 214 billion rupees Rupee to 366 billion rupees, and an IMPS transaction not used by humans received part of 651 billion rupees. Data provided by the Reserve Bank of India reflects this trend:
According to Bloomberg News, after the de-monetization of the Indian stock market, as the BSE index reached 27,459 on November 7, 2016, it rose to 33,680.92 on November 6, 2017, and the NSE increased from 8,497 lots to 10,443 lots.
Bank financing for small businesses has declined due to the expected cancellation of monetization. Even in just a few months, there has been a negative growth. On November 25, 2016, bank loans to small businesses had a negative growth of -7.71%. December 23, 2016–8.16%; however, on September 29, 2017, the Reserve Bank of India reported that loans to small businesses were increasing by 1.65%.
In 2016, the sales of second- and fourth-wheel vehicles showed negative growth; as the report reflects, it expanded significantly in 2017, rebounding from the impact of negative growth on strong positive growth.
More and more people no longer use cash, but use mobile wallets to pay for necessities. Even the least educated people have learned and turned to mobile operations. The transaction volume reached 22.14 billion rupees in January 2016, an increase. As of January 2017, it was up to Rs 83,530.
In less than a year, the growth of the Indian economy after demonization slowed from 9.1% to 5.7%. According to the monthly chart of GDP growth from March 2016 to September 2017 provided by Bloomberg, the specific approach is as follows:
The decision of triple demonetization, RERA and GST slowed down the introduction of new properties. In the first three quarters of 2017, the supply of new condominiums in six major cities in India dropped by about 60% from the previous year. In terms of real estate sales, the secondary market is obviously more obsolete than the primary market. Mainly due to demonetization.
But now, the shadow of demonetization seems to be fading in reality: generally attractive mortgage interest rates, flexible payment plans and other attractive offers from real estate developers, as well as limited new projects, have led to a steady decline. In unsold inventory. In the third quarter of 2017, only 638,500 residential units in the six major cities were unsold, a decrease of 9% compared to the fourth quarter of 2016. The demand for affordable medium-sized living space is growing. In terms of housing loans, the government’s efforts to provide affordable housing through Pradhan Mantri Awas Yojana (PMAY) and the “Housing for All 2022 Mission” have stood out in the past year. Make the real estate industry more transparent, more organized, and fundamentally stronger. Demonetization played an important role in this.
In the long run, by 2028, the real estate industry may return to a faster growth track, accounting for about 13% of India’s GDP. Given the various reforms that are currently redefining the real estate landscape, this optimistic outlook is in our grasp. In India, this will not only gradually increase consumer confidence, but also increase investment flows from domestic and foreign institutional investors. Moment of the Indian economy. “Demonetization not only changes the agenda, but also makes corruption more difficult. Therefore, in his view, this is not only a “moral and ethical correctness” but also a step of “political correctness.