DEMONETIZATION --- EFFECTS AND SHIFTING TRENDS OF MARKETING
IN INDIA
Ms Jyoti Tyagi 1 and Dr. H.L Verma2
1 Research Scholar, Jagan Nath university, Bahadurgarh, Haryana
2 Vice Chancellor, Jagan Nath University, Bahadurgarh, Haryana
Abstract
Demonetization is a course of action where government declares the currently running currency
notes illegal to be tender after the announcement is made. This kind of announcement is done in
the year 2016, through Prime Minister Sh. Narendra Modi. After demonetization of Indian
currency notes of Rs. 500/- and 1000/- and with the limitation of withdrawals of rupees from
bank account and rupees 2000/- from ATMs. There was a sharp shortage of money in the market
and a daily transaction was severely affected. The last demonetization was done in the year 1978
where currency notes of 5000/- and 10,000/- were dissolved and in the year 2016 after a long
gap, but this time people have many alternatives to make transactions and make transactions like
with mobile banking, online banking, e-wallets, online shopping, debit cards, credit cards, etc.
There are both pros and cons of demonetization it is like a refresh button on the Indian economy
and flush all the cold deposited money into the economy, to the market through proper channels.
The act is for going cashless transactions and many e-wallet companies like Paytm etc. are
having a good response and government is also supporting the same. The article shows the
effects of demonetization and shifting trends of marketing in India. It also explains the pros and
cons of the demonetization.
Keywords: Demonetization, Black Money, online-shopping, online banking, e-wallets, Credit
Cards, Debit Cards
I. INTRODUCTION
The demonetization in India is a clear indication of where the nation is moving. Cashless India is
apparent, unavoidable and needed. Since our economy is heavily based mostly on cash, as only
less than half the population uses a banking system for monetary transactions, demonetization
has hit trade and consumption hard. With people scrambling for cash to pay for goods and
services, the move is likely to take a major toll on the country's growth and output during the
current fiscal. Consumption makes up for around 56% of India's GDP, hence, a drop in spending
will pull down growth. The Central government’s new decision to demonetize the highest valued
currency is one of the major steps towards the destruction of dark colored money in India. The
demonetization drive will impact some extent to the general public, but for the longer interest of
the country, such decisions are unavoidable. Also, it may not curb black money fully, but
definitely it has a major hit in curbing black money to a huge extent. Some economists opine
recent demonetization is a big bang structural reform, which the Indian economy required.
Almost all asset classes were blinded under huge price bubbles and assets like a decent house,
gold had almost become inaccessible for the Aam Aadmi. In the short run, define the entire
nation will pay the costs, however, in the long run, this step will cut the asset price bubbles and
cause prices to drift close to their real values, give a hit to the parallel economy and reduce
overall crime. After the announcement of the demonetization of 500/- and 1000/- rupees note and
introduction of new currency of 2000/- and 500/- rupees note the situation clash, everyone, those
who have the so-called black money or those they do not have the same, the situation is much
improved and different at this time if we compare it with the last demonetization done in 1978
where the bank was only choice to make all kind of transaction but now we are well equipped
with technology and infrastructure to support the cash and cashless transaction. People and
government are having more than one choice to make the purchasing or support transactions to
make the situation in equilibrium like online banking, mobile banking, online shopping, e-
wallets, credit cards, debit cards, UPI (Unified Payment Interface) etc. and day by day different
things are coming up. This paper discusses the effects and the alternative choices available to
make payments and how people are moving towards cashless transaction and how service
providers are making this demonetization as a big opportunity to settle in this hard phase of the
economy.
2. Demonetization- A master stroke
Demonetization is one of the biggest and boldest economic decisions ever seized in the history of
the country. Demonetization was the need of the hour to repair the country’s unpredictable and
damaging growth paradigm. There are many reasons to explain why demonetization is a
supreme tool to correct the surreal pattern of India’s growth.
1) Bringing back the unaccounted money in the form of high denomination notes of Rs 500 and
Rs 1000 which comprise about 87% of the Indian cash asset into accounts. This will get rid of
the deepest buried hoardings of cash with the concentrated few as either the cash will have to be
deposited into the banks or burnt. It's a win-win situation both ways. If the cash is deposited into
the bank, there will be a heavier tax collection opportunity for the government and the accounts
can also be outlined if found with unreasonable and unjustified deposits. Or else, the uncollected
cash will be out of the system, eventually helping to reduce country’s debt.
2) The instant flushing of higher denomination notes and restrained circulation of the new notes
will result in a much stable and composed inflation.
3) Real estate, gold, and stock market will receive a required correction in the prices. This will be
carried genuine help to the common people as housing, land prices, etc. will be affordable.
4) Demonization along with a less cash economy focus of the government will make
understanding among people to use digital ways of transactions, which is a cleaner and healthier
way of transactions.
5) Interest rates can also come down with more funds getting collected in an official and
accounted way. This will give a boost to start-ups, small and medium business setups invest at
cheaper rates, which will eventually cause the creation of careers and bolster growth.
6) Construction Industry in India is literally submerged with the use of black money. With
demonetization, the industry experts believe a slowdown in construction activities. This may be
true in case of big projects where an abundance of black money is used, but small-scale
construction industries can experience a boom as the demand for reduced cost housing, land, etc.
will surge due to improvement in prices of the real estate assets thanks to demonetization. This
will provide the country’s lower, middle and middle-class population and freedom to invest,
improve the quality of life and grow towards achieving equality in the conditions of a reasonable
standard of living as well as create an opportunistic environment.
7) Counterfeit high denomination old notes which have been circulating in the country, helping
terror funding, have been taken into full control with this one step of demonetization.
8) A large amount of black money in cash resting abroad has simply been clashing with a single
move of demonetization. This unaccounted cash anywhere abroad is just a piece of junk and
cannot be converted in any way whatsoever unless the justification is provided.
Demonetization and a synchronic push towards digital banking is a great step taken by the Indian
government. There are many other benefits in every possible way with this move than listed
above and is a necessary decision taken to bring back the country’s growth on the right track.
There is turmoil bound to happen when such a vast decision is made, but the long-term gains
with this single move are larger. Having said that, demonetization alone is not a problem for
every solution. It is a tool to correct some of the problems in the system and has to be followed
with other tools and software’s to clean other obstructions before the track is ready for a constant
progress.
3. The Effects of Demonetization on Indian Economy
3.1) Effects on Parallel Economy
The removal of these 500 and 1000 notes and reinstatement of the same with new 500 and 2000
Rupee Notes is expected to – remove black money from the economy as they will be choked
since the owners will not be in a situation to deposit the same in the banks Temporarily stall the
circulation of the large volume of counterfeit currency It would curb the funding for anti-social
elements like smuggling, terrorism, espionage, etc.
3.2) Effects on Money Supply
With the old 500 and 1000 Rupees notes being scrapped, until the new 500 and 2000 Rupees
notes get widely circulated in the market, money supply is expected to shrink in the short run.
For the duration that black money (which is not counterfeit) does not re-enter the system, reserve
money and so money supply will decrease permanently. However, successively as the new notes
get circulated in the market and the mismatch gets corrected, the money supply will pick up.
4.) PROS AND CONS OF DEMONETIZATION IN INDIA
Pros
End of oversize Donations
Support for Government Finances
Huge decline in black money
Almost End of Fake notes racket initially
Clean Election
Rise in Amount in Savings Account
Cashless transactions
Obstacle for terrorism
Increase in Online Transactions like PayTM, Free charge etc.
Cons/ Negative Effects
Lowering of Stock Market
Running out of Money - Empty ATM’s
Impact on service industry
Inconvenience to small businesses and traders
Money will be drawn out of the market
Decline in the GDP
Loss to common People
• Effect on cash-dependent sectors
Consumer goods
Gold and luxury goods
Automobiles
Real estate and property
5. AFTER EFFECTS OF DEMONETIZATION ON MARKETING / PURCHASING
The effect of demonetization hit suddenly to all sectors like marketing, manufacturing and to the
common people, most of the common people are in favor of demonetization, assuming it will
bring the new modification in the way people use to trade, we are having many options today to
trade cashless through credit card/ debit card, online banking, with distinct features added to
mobile commerce like an e-wallet. Slowly people are accepting and the government is also
pushing by every means to go cashless. If we look at the market conditions there is a loss in
each and every field either it is manufacturing or retailing, the most damaged businesses areas
are those who are entirely depending upon “cash transactions” for example, there is a statement
which states that “Hauz Khas, Khan Market worst affected by demonetization: India Head of
Business, Barcelos”
“Markets like Gurugram have not been impacted much by demonetization – the total impact on
the business is just 5-7 per cent – but markets like Hauz Khas and Khan Market, where major
than 40 percent sales are based on cash transactions, have seen the dominant impact. Only 10 per
cent business has transformed to cashless transactions. The remaining 30 percent is simply a
loss.”
In India there are several markets, which are running on the cash transaction for many decades
and people as well as the merchant are accepting and giving cash as a mode of transaction, the
decisions like demonetization of currency are affecting them badly to improve the condition
people should have an alternate plan to go cashless. There are many street dealers who are
moving towards cashless payment by opting PayTM, Oxigen, etc. E-wallet the over mentioned
images are indicating that people are moving towards cashless society,
The Advantage of E-wallet First, e-Wallet is a prepaid account. Hence, there is conclusively no
question of rejecting of services and goods. Unlike credit cards, where any intended or
unintended default may chunk the card for further use, eWallet is never denied service. Second,
e-Wallet provides a huge variety in the limit. People can create their e-Wallet with amounts as
low as Rs. 10 and as high as Rs. 10,000 or more. It is simple in usage and even simpler to get it.
There is no credit history check, or demand of large documents.
Types of E-Wallet
There are three types of e-wallet available in the present scenario- Generic online E-Wallet -
Oxigen, PayTM, etc.
Company specific E-Wallet - companies provide e-Wallet clearly to be used by that company
only. For example, Meru cab’s e-Wallet can be used with Meru cab services. Shopping store
specific lie Walmart, etc.
Bank E-Wallet - ICICI Bank, SBI, Axis etc. all have e-wallets.
Indian E-Wallet Services- Paytm, Free Charge [Snap deal], MobiKwik, Airtel Money, Vodafone
M-pesa, Chillr, Oxigen Wallet, PayU Money, Pockets by ICICI Bank, m Rupee.
6. PURCHASING TRENDS AFTER DEMONETIZATION
After demonetization, there is a variation in the purchasing trends of goods and services in
market vendors and shopkeepers is accepting payment through credit/debit card as well as
through e-wallet. People, especially youngsters, are deciding the cashless route of payment for
goods and services. There are various feelers and incentives offered by the e-wallet companies
like the pay through us and get “x” amount as cash back for making the transaction.
The benefit for the use of “free charge” will get some discounts in return, like free charge, are
offering cash back offer on various outlets like, at the HP petrol pump - 10%, at McDonald -
50%, Domino’s Pizza - 20%, Vishal Mega mart - 20 %, Barista coffee - 20 %, Cafe Coffee Day
- 15 %, Fun Cinema - 10%, Book my show - flat 100 Rs. Off, Haldiram - 20 % and at OYO
rooms - 10% Cash back is given. Free charge is now offering shop online on eBay India using
Free Charge After demonetization common people are moving towards this kind of apps and e-
wallets, and the company who offers these services is motivating the customer to make the
transaction through them. We can see there is an active growth in these kinds of e-wallet or apps
for making payments. Other than this the government is also asking the system to go cashless
and bringing all the necessary support to the people for the cashless economy.
The government machinery is started assistant to make a platform for a cashless society, all the
villages are made completed for cashless money transfer all the payment will be routed through
cashless transfer and government is making an outline to make this happen in the real sense. Not
only the government, but also the private players like ICICI bank is also making the move to
make 100 villages in 100 days, "besides creating a cashless payment system, we will provide
vocational training and credit linked to make villages digital" - Chandra Kochar, ICICI Bank. In
the first phase, ICICI Bank will use the tablet - based banking and Aadhar based e-KYC to help
villagers open accounts without submitting physical documents. All the adults in the village will
have savings accounts which will be linked to Aadhar to enable direct transfer of government
benefits.POS (point of sale) machine is used to make payment through credit/debit cards while
making the purchase. It can be frequently seen at the petrol pump or in shopping malls. To make
the digital cashless payment government has offered a discount on the POS machines so that the
machines will reduce down in their cost by 16.5%, the merchants or vendors can purchase them
to get the payment from the customers. The car manufacturers are also in the line of the cashless
transaction as the sale garb down due to demonetization effect, they are offering customers to
avail discounts and obtaining payments through credit cards, debit cards, or online banking. This
is a good sign for the Indian economy for going cashless.World’s number two mobile giant
Vodafone is also offering the 12% off on buying at Shopclues with M-Pesa. It is a mobile E-
wallet from Vodafone, M-Pesa is also can be used in paying Vodafone bills through the mobile
e-wallet and it is crediting Rs.25 for the next 3 months if you pay the bills from M-Pesa. The
billed amount will be debited from your credit card or bank account.
People are starting using these facilities as an alternate option to cash for paying utility bills etc.
there is a growth in deciding cashless transaction in daily routine purchasing and companies are
also making the attempt to get the money from customers from credit/debit card or other options
like PayTM etc. the attempt of government is to change from cash to cashless transaction this is
the changing phase and people are somewhat resistance to obtain the change in general but in
metro cities this trend is picking up very fast. Admitting to the Snap deal example quoted earlier
Delhi is on the top in online purchasing than comes Bangalore. We will be able to order a host of
products online, e-commerce also allows various ways to order products and services online,
including the usage of credit/debit cards or e-wallets, like the case of PayTM or Freecharge in
India. This will allow for the instant flow of money from one account to another while being
transparent to the right authorities respecting transactions taking place. Also, helps in case of
high- value transactions where the risk for loss of cash exists.
7. CONCLUSION AND SUGGESTIONS
After the statement of demonetization of 500/- and 100/- currency notes on 8th November 2016
the situation became very tense, all of a sudden people and marketers face trouble and banks
were working even on holidays for making the situation stable. This time people have alternative
options to purchase the goods, even with the limited cash distributes through ATMs. If we talk
about the alternative options in the market to pay “cashless” we are having E-wallets, credit and
debit cards, online banking and mobile banking. People are accepting and moving towards m-
commerce by using e-wallet like PayTM etc. many street merchants and shopkeepers are
accepting payments through e-wallet like PayTM, Free charge, etc. news and the media are
publishing news about accepting the “cashless” transaction in daily routine purchases, the
government is closely working in the direction of making Indian Economy as “cashless”
economy. Companies like Amazon carrying up the latest technology equipped store named
“Amazon Go” where there will be no queues, no cash required, just shop and go, the payments
will auto debited from your bank account. E-wallet companies are supporting “cashless”
transaction with “cash back offers” and “Discount” on the buyings and making payments
through their e-wallet. This motivation drives people to pay cashless. After studying the scenario,
and demonetization effect I would recommend that there is an acute need for educating people
about various alternatives available in the market and making the online transaction, or safe so
that people can trust on this system, constantly the change will come as the new generation will
grow and start using this technology nowadays we are having 4G network with high-speed data
connection and smartphones available, in near future the purchasing trend will be more flexible
and shifted from e-commerce to m-commerce.
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