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1.1 Background of Study
“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”. (www.investopedia.com). 
On November 8th 2016 India’s Prime Minister Narendra Modi declared that the use of 500 rupees and 1000 rupees is abolished and new currency would be introduced. People were given a time period of 50 days to exchange the old notes from 10th November to 31st December in addition to a limit of withdrawing cash up to 24,000 rupees a week or 2,500 rupees a day. The two most valuable currencies of 500 rupees and 1000 rupees would be just a piece of paper after 31st December. Indian government recalled $224 billion worth old currency and replaced it with the new currency. (Nupur, Sanket, Mehul, Narendran, & Mudith, 2016) 

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The chief reasons for demonetization were to:

Terminate the black money,
Eliminate forged currency in India 
End the funds used by terrorists. 

Narendra Modi aimed to recover the black money which was stored by the wealthy people and to disclose the money. The government targeted the tax dodger and the black market player who hid the black money. Another reason for the demonetization was to eliminate the fake currency as 250 out of every million bank notes are forged and to end the fund used by terrorists. India accused its neighbouring country Pakistan for producing bogus notes to carry drug trade and terrorism. 
Demonetization had adverse effect on the economy due to the shortage in circulation of money as 95% of the people in India prefer to use cash, as labour’s were paid their wages in cash, most of the firm did not have cash to operate their business and thus, were affected negatively. Hospitals rejected from accepting the old notes which in turn led to many deaths. Families had difficulties in buying consumer goods. Taxi as well as rickshaw drivers refused to accept old notes. Farmers encountered problems; a large number of weddings in the country got cancelled due to the demonetization.
Common people went through standing out at an ATM and did not get the cash they needed. People were standing in a queue for 5 hours in front of an ATM leaving their jobs and work. People in rural area did not have bank accounts to convert their old notes.
The announcement of demonetization led to a chaos as many people rushed to jewellery shops as well as fuel stations to swap and reserve their black money by exchanging it with foreign currencies and by buying jewelleries. The government provided with amnesty programs to surrender their black money and would get 50% of the money back.
1.2 Research Objectives 

To identify as well as explain the reasons behind the demonetization in India.
To analyze the effects of the demonetization that occurred.
To make recommendations based on the findings.

1.3 Research Questions

Has demonetization achieved its goal of terminating black money, eliminating fake currency and ending the funds used by terrorists?
Are there any other ways besides demonetization to achieve the above mentioned objectives?
How is the Indian economy recovering / doing post demonetization?
Was demonetization the right steps to be taken considering maximum population of India comes from rural areas as they lack facilities?  
Was introducing 2000 rupee note instead of new 1000 rupee a bold move?
Will demonetization effect prime minster Narendra Modis’ next election?

1.4 Research Structure
This dissertation mainly contains five chapters which cover the entire topic of demonetization and its effects in India in depth. The first chapter explains the main reason behind conducting this research and highlights the questions this research is based on. Moreover, chapter two reviews and critically analyses the academic literature and the opinions of authors positively as well negatively with respect to the research questions. The research methodology will be described in details in chapter three whereas in chapter four, the research findings are mentioned and examined. Finally, in chapter five certain recommendations are discussed in addition to drawing conclusions. 
2.0 Literature Review
Urjit Patel, the Governor of the Reserve Bank of India (RBI), the country’s central bank, said that the new notes of 500 and 2,000 rupees would have “a better design harder to copy” and assured the public that Mahatma Gandhi would remain an untouchable figure of the Indian currency. The idea behind this change is to control the amount of 2,000 rupees supplied so they do not flood the market. At a press conference, Patel said that “there would be no impact on liquidity, and if so, they would ensure that it is controlled”. (Mohammed, 2016.
Although the measure seems drastic to some it comes after a great concern of the growing number of counterfeits. During the aforementioned press conference, the Secretary of Economic Affairs, Shaktikanta Das, defended that this unexpected decision was “completely necessary in the interests of India’s economy both in the medium and short term goals, he adds that this will help to maintain financial and economic integrity” (Mohammed, 2016). The Indian economy was not growing at the same rate as the monetary circulation moving at that time; Nationwide there were around 16,500 million banknotes of 500 rupees and 6,700 million of 1,000 rupees. Between 2011 and 2016, its circulation has grown by 76% and 109%, respectively (Safi, 2017). India had already lived through a demonetization phase in 1978, under the mandate of Morarji Desai, when up to 10,000 rupiah banknotes were withdrawn. 
West Bengal finance minister Amit Mitra asserts that there was not enough planning done before this decision was taken and his belief is that it would have been better implemented at a different point in time. Mitra told a TV channel they were unaware that there would be a considerably greater destabilization as demonetization that would be let free on the country.
Jitendra Singh, emeritus professor of management states that demonetization was a fearless and a visionary stride by Narendra Modi to battle against corruption in the nation and it is ahead of schedule to number the effect of demonetization, the action brings up many issues such as what will have been gained from demonetization and what will be lost due to it. Singh says “He believes that the general population that supported the demonetization movement were always aware that it was a long way from being a perfect plan” (Menon, 2016).
Jayati Ghosh, a teacher of sociologies at Jawaharlal Nehru University supports the idea that previous scenarios of demonetizations throughout history have been executed with some warning ahead of time, given that this decreases the harm to done to the citizens (Angad, 2016). Furthermore, he believes that the government could screen suspicious exchanges after the new change have been announced, similarly as it is doing now; and that either way he would not have demonetized 500 rupee notes, only the 1,000 rupee notes given that those are the one causing the main problems.
Karthik Hosanager an educator in wharton’s branch of operation data and choice says that “The greatest wild card in the majority of this, obviously, is demonetization”. India’s richest businessmen Mukesh Ambani and other business tycoons like Ratan Tata, K V Kamath and Deepak Parekh are supporting the demonetization.
3.0 Research Methodology
3.1 Quantitative and Qualitative Method
Usually, researches are categorized in to two types: quantitative and qualitative. The type of research mostly depends on the data that is collected for the research to be conducted (Brown, 2010). However, there are very obvious differences in both the types of research. In the case of quantitative research, researchers collect large amounts of specific variables related to the context of the research. The data used is usually numerical and specific to rule out any ambiguous possibilities. The only drawback of using quantitative analysis is that researchers often face difficulties because the findings are mostly shallow due to less depth of information (Saunders, Lewis and Thornhill, 2009). Whereas, in the case of qualitative research the research focuses on a holistic view of the data related to the research. The data used here is based on interpretation and observation. (Complementary Research Methods, 2008)
This is a quantitative research as the data of demonetization is analyzed in the form of statistics besides empirical investigation. Percentages, statistics and other numerical data were examined in this report which highlighted the effects of demonetization in India. In addition, conducting a quantitative research will allow obtaining an unbiased result through measurable facts that will clearly describe the cause as well as the effect regarding the matter that is being addressed. 
3.2 Research Approach 
A deductive approach is adopted in this research as a valid reasoning is being identified and discussed about the revaluation of Indian currency in 2016. The generality that demonetization can eliminate ‘black money’ is being questioned in this research in order to reach a realistic yet a logical answer. This is a realistic research since demonetization is an act that was carried out in reality and requires accurate evidences to prove factors related to it. Moreover, having a realist approach can provide descriptive answers that will allow an easy conclusion to be made.
The key data that this research will be based on is secondary. This is because the information which is being used will mainly be journal articles as well as news reports that were written for some other purpose but will be used in this research for another purpose. Other sources such as books and websites will also be used in order to support the preferred point of view. Also, not many hassles are to be taken care of in secondary data because only existing confirmed data will be collected and used for this research.
Finally, the data used has been collected from the following types of sources for the corresponding reasons:

News reports:

To see reported information, possibly numerical data or statistics about the effects demonetization had on the Indian economy. 
To comprehend the effects of demonetization on wealthy politicians with the measurable evidence.
To study the extent of this effect on standard public.  

Journal articles:

In order to understand what demonetization actually is according to different writers. In addition, checking whether the understood meaning is common and standard for everyone.
To identify the effects of demonetization on economy. And to narrow these identified results down to the case of India. 
To categorize the advantages as well as the disadvantages of demonetization in India.

3.3 Ethical Considerations
This research does not involve human participants; hence, no privacy and confidentiality was invaded. In addition, no sensitive information for or against any human or organization is used. Moreover, only accurate and unbiased data or source is used to analyse and explain the concept of this research. Finally, proper credit is given to the authors and researchers in order to acknowledge their ideas. Any information that is taken from the work of another author is correctly cited and referenced. 
3.4 Research Limitations
Every research has some limitations and weaknesses. Quantitative research requires a lot of information on large scale. Some limitations of this research are: 

Since demonetization is a recent event, all information that is gathered may be of short term use and may not hold value in the long term.
There are many opinions and views on demonetization. Hence, reaching a conclusion would be difficult as there would be clash of perspective.

4.0 Research Findings

Black Market –

Demonetization proved to be a failure to eradicate the black money. Mostly, people in India tend to have their black money invested in properties, gold, expensive jewelries, offshore account, and foreign currencies. Those days are gone when people used to have stacks of black money hidden or stored as hard cash. Black account holders could have multiple accounts on their relatives name or other name. There were attempts made earlier to discontinue black money in 1978 by Morarji Desai, former Prime minister of India. Government led by Morarji Desai introduced HIGH DENOMINATION BANK NOTE ACT and made RS 1000, RS 5000, RS 10000 illegal, with an aim to reduce the black or shadow market which was estimated to be 15%-18% GDP. However, the black economy increased up to 18%-21% in 1983-84 (Doctor, 2016). 

Post Demonetization –

Due to improper money supply and terminating the high denomination currency, notes have directly damaged the asset price inflation, led to rapid growth in inflation. Economic growth has fallen because of inadequate money supply which has reduced the purchasing power of the people at macro level. People in rural area engaged in farming are finding it difficult to crop this year due to shortage of cash by SMEs (Small & Medium Business Development Chamber of India), manufacturing sector which is also influenced by the SMEs are encountering hard cash problem. Automobile industries have also witnessed a great decline on sales compared to 16 years by 19%, with 300,000 fewer purchased vehicles in last month. Sales of two wheelers which are commonly used in rural and urban areas had declined by 22%. Demonetization had the biggest impact on the real estate market, property sales had dropped by 44% in major cities of India. Delhi is one of the cities that was hit sharply. 

Rural Economy –

In a country where most of the people are unaware of online banking and get paid in wages, these are the poor people from both urban and rural areas who are mostly affected by the demonetization. The sector forms 69% and 75% of the urban and rural employment where wages are paid and spent in cash. Rural people who are the majority of daily wage laborers, farmers or small traders earn their income in cash, however these people rely more on cash and do not have bank accounts or have no access to modern methods of transaction like debit or credit cards; therefore, the impact of demonetization is larger on them. For instance, in Delhi’s Azadpur mandi, which is Asia’s largest agricultural supply chain spanning 90 acres, has seen a drop of 50% to 70% of its business (Angad, 2016).
The economy and market were negatively disturbed because of the poor implementation by the government. The two poor implementations were: they did not have adequate RS 100 and failed to circulate as well as introduce enough RS 2000 and RS 500 properly in banks and ATMs.
5.0 Recommendations & Conclusions
To sum up, in order to cut the financing of terrorism through Forged Indian Currency Notes (FICN) and to eliminate Black Money, the legal tender of High Denomination bank notes such as the Rs. 500 and Rs.1000 was decided to be cancelled.  The timing that the Prime Minister chose to announce the demonetization was a surprise. However, if this announcement would be made in advance, then it was very likely to be self-defeating in nature by letting the black money holders to swap their cash for gold or other forms of wealth. Not only the daily lives of the common citizen were disrupted, but the entire economy was affected as well. As real estate and politics run on cash, formal sources such as banks and hospitals run on cash too. Conversely, rural areas lack such formal sources of banking thus creating a sense of tension in the atmosphere. Similarly, workers, drivers, urban households are paid in cash of these denominations; therefore, the impact on people with no access to digital transactions was fairly large. Currently, it is too early to generalize the effect of demonetization on the society and economy. But the advantages of this act will be felt in the long-term. As a long-term result, formal ways of payments like electronic cards, net-banking, etc. will get a boost. Nonetheless, feeling this result will take some time because still a majority of India’s population depends on cash transactions. Finally, this was a very bold move by the Prime Minister which arguably changed many lives. 

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