Articles Presentation

on
Demonetization
Introduction of Presentation
Focused on demonetization case of India
and consider the several news paper
articles,
Aimed to indentify the impact on economy
of demonetization,
How Nepali Economy Affected from Indian
movement?
 Meaning
Demonetization is the act of stripping a
currencyunit of its status aslegal 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. Sometimes, a country completely
replaces the old currency with new currency.
 Reasons
to combatinflation
to combat corruption and crime
(counterfeiting,tax evasion)
to discourage a cash-dependent
economy
to facilitate trade
 History
Soviet Union
In the year 1991, Mikhail Gorbachev Government
banned the currency note of Ruble 50 and 100 in
Soviet Union to end black money in the country.
Ghana
In 1982, government of Ghana demonetized
currency notes of Cedi 50 to control black money
in the country
 History
Britain
Before 1971, pond and pens currency
used to be circulate in Britain but to
bring uniformity in currency government
stopped circulation of old currency in
1971, and bought coins of 5 and 10.
 History
Congo
Dictator Mobutu ceases made some
changes with currency of Congo for the
smooth running of economy during 90s.
Myanmar
Military government discontinued
currency notes in Myanmar in 1987 with
the same thought of end of black money
and corruption.
 History
Nigeria
In 1984, Muhammadu Buhari was the
President of Nigeria, that time he
started new currency notes with design
and colour to bring economy in stable
position.

North Korea
Australia
 Demonetization in Nepal
Polymer Notes of Rs.10,
Printing of Rs.1 & Rs.2
All notes with image of King
 Demonetization in India
In 2016, the Indian government
decided to demonetize the 500- and
1000- rupee notes, the two biggest
denominations in its currency
system; these notes accounted for
86% of the countrys circulating
cash.
Few facts of Indian Economy
Rs.500 notes accounted for 47.8% in
value and Rs.1000 notes another 38.6%
and together 86% of currency circulated
in market,
90% of financial transactions on CASH,
85% of workers of paid on CASH,
50% of population is UNBANKED,
 Supporters of
Demonetization
to combat corruption and crime
(counterfeiting,tax evasion)

to discourage a cash-dependent
economy
 In its true sense, the withdrawal of the
500 and 1000 rupee notes in India is
not demonetization in its true sense as
Indians are allowed to convert them to
bank deposits provided they can prove
that the money was legitimately
earned. So Indian authorities write off
the liability of only those banknotes
which do not come back to the
system; in other words, only this
portion is truly demonetized.
 Against of Demonetization
Cash based Economy,
Majority of people are unbanked,
72% of illicit assets are held abroad
and use of dollar for black money,
Size of black money is unaccounted,
No effective Tax Policy,
Circulated in Nepal, Bhutan,
Bangladesh and Sri Lanka
 Against of Demonetization
Cash based Economy,
Majority of people are unbanked,
72% of illicit assets are held abroad
and use of dollar for black money,
Size of black money is unaccounted,
No effective Tax Policy,
Circulated in Nepal, Bhutan,
Bangladesh and Sri Lanka
 Politics and Economy
2014 Pradhanmatri Jan Dhan Yojana
(250mn account in a month)
2015 Disclosure of Foreign Black
Money (Swiss Bank / FATF / AML /CFT)
Demonetization
 Projection for Indian
Economy
Positive Expectation:
Use of formal economy and bank
deposit will increase Current and
Saving Deposit portion increased
Cost of fund decrease Lending rate
goes down Infrastructure funding
increases Employment /Income /
Investment Increased Long Term
Economic Growth
 Projection for Indian
Economy
Positive Expectation:
Use of formal economy Higher
Collection Tax
Raise the GDP Inflation goes down

Pressure to reduce the income tax

Increase the disposable Income
Increase the consumption Demand in
Long Term
 Projection for Indian
Economy
Positive Expectation:
1.Improved tax system,
2.Inflation Control,
3.Lower Corruption,
4.Elimination of Fake Currency,
5.Sustainable Economical Growth,
 Projection for Indian
Economy
Negative Expectation:
1. Share market Down by 40%,
2. Real Estate market is at danger zone and some
projected to crash even,
3. Loosing faith on currency,
4. GDP down by 2%,
5. Mainly Poor / weaker section affected,
6. Small Scale Industries / Traders /Daily wage
workers suffered, (cant come back again)
7. 82 people dead
 Projection for Indian
Economy
8. Fish market is almost crashed,
9. Traders of perishable goods closed the business,
10. Agriculture Production is expected to fall down
by 4% due to non-availability of seeds during
winter,
11. No-cost benefit analysis,
12. No alternative policy,
13. No impact study
14. Rs.500 / Rs.2,000 available in place of Rs.500 /
Rs.1,000 so no long term solution
 Ban in India Pain in Nepal
Nepal, where the financial system is
accustomed to accepting the Indian Rupee as a
second legal tender in addition to the local
Nepali Rupees.

The growth of international trade meant that

some currency bills, especially those issued by
larger economies gained acceptance beyond
national boundaries. The US dollars, Euros, Yens
and Pounds have become international
currencies, accepted all over the world.
 Ban in India Pain in Nepal
The Indian and the Nepali governments
allow their nationals to carry Indian
banknotes of up to Rupees 25,000 in
either direction.
Major Trade / import dependent with India,
Open Border,
No improved payment system on both
counties,
 Ban in India Pain in Nepal
The impact of demonetization will be felt not only
by those holding Indian notes, but also by the
wider public.
Trade between two countries has severely
dwindled. Indian tourist numbers are going down.
The government may be hoping that traders from
now on will be bringing goods at true prices as
they can pay for the goods through banking
channel. But there is a flipside; the prices may go
up as they will have to pay duties and charges on
the basis of the true price and not on the under-
invoiced price.
 Solutions to the problem
The first option most Nepalis will favour is, of
course, that Indian authorities allow Nepali
monetary authorities to accept the notes,
which will then be accepted by the Indian
Central Bank.

The next best option for Nepal would be a

limit, say 25,000 Rupees per person, (the
official limit an individual can carry as per the
Reserve Bank of Indias rule) to be converted.
 Solutions to the problem
The third option, and the most likely, is
that the RBI will accept old notes up to a
certain amount being deposited by the
Central Bank in Nepal. The Indian officials
in their press briefings have been saying
that the issue will be resolved through an
agreement between the two governments.
 Suggestions
Believe our own currency
Follow the formal Banking Channel