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.

REFERENCES

1. http://economictimes.indiatimes.com/news/economy/policy/what -is-demonetization-and-

why-was-it is done/article show/55326862.cms

2. https://www.researchgate.net/publication/280880794_Buying_

Trend_Shifting_of_Online_Shopping_from_E-com_to_Mcom_from_Click_to_Tap

3. http://www.indiaretailing.com/2016/12/22/food/foodservice/hauz-khas-khan-market-

worst-affected-by-demonetizationindia-head-of-business-barcelos/ -December 22, 2016

4. http://indianexpress.com/article/india/india-others/kirana-storeas-neighbourhood-bank/

www.npci.org.in/documents/FAQs-NUUP.pdf

5. https://www.researchgate.net/publication/304697020_An_Empirical_Study_about_the_A

wareness_of_Paperless_ECurrency_Transaction_like_EWallet_Using_ICT_in_the_Yout

h_of_India.

6. https://www.studydhaba.com/demonetization-pdf

7. www.indiaretailing.com/ India retailing Bureau -December 22, 2016