The Indian government had demonetized bank notes on two prior occasionsonce

in 1946 and then again in 1978and in both cases, the goal was to combat tax
evasion by "black money" held outside the formal economic system. The
government claimed that the action would curtail the shadow economy and crack
down on the use of illicit and counterfeit cash to fund illegal activity and terrorism.
The BSE SENSEX and NIFTY 50 stock indices fell over 6 percent on the day after the
announcement.

What is impact of demonetization on digital India

Pros

1. Demonetization will act as a catalyst, largely from urban India or more accurately banking
enabled and internet enabled which is around 35% of India's population. Since there is a cash
shortage, usage of electronic means will increase.

2. The size of the sector will see an upswing and bigger valuation, more investments will flow into
these sectors

3. User adoption will be faster, since users now have to learn to adopt the new order of things.
Earlier these companies had to educate the target audience. Hence user acquisition costs was
higher. But now the scenario has changed.

Cons

1. Overall market does not increase Market size in fact shrinks, since people have begun
buying less. So overall the market shrunk. The additional growth of digital economy
comes at a cost to small and medium traders. Our robust un-organized retail provides a
significant no of jobs. This directly impacts this sector and will cause job losses leading
to loss of livelihood

2. The above mentioned PROS are temporary once the cash is back into the hands of the
users, it is likely that we see a significant erosion to whatever is gained in the short term.
Simply because cash is an interest free instrument. A two thousand rupee note remains
two thousand even after 1000 odd transaction. Where as if a value of two thousand moves
through the digital ecosystem (transaction costs, gateway charges etc) there is a
component which goes out of users pocket every time this happens.

3. Security is of a huge concern since the systems are yet to be water tight with major
loopholes yet to be sorted.

More than half the population does not have access to the formal banking system and only a
small percentage of the population uses credit or debit cards. The average number of card
transactions per inhabitant is a mere 6.7% compared to China (14.4), Brazil (54.8) and the UK
(201.7), according to a recent RBI report.
Only 15% of online or point of sale transactions take place using credit or debit cards. This
compares with the 88% that use cards to withdraw cash at ATMs.

People are reluctant to try new things unless it becomes necessary. The demonetization will
nudge a larger number of individuals to lessen their dependence on cash transactions and resort
to digital payments. Downloads of Paytm wallet (a mobile e-commerce company with a user
base of over 150 million) has tripled since November 9. The earlier attempts of the Reserve Bank
of India which has granted permission to 11 Indian companies such as India Post, Reliance
Industries, Airtel, Vodafone, etc. to venture into the payment banking sector came with limited
success.

For its part the government needs to facilitate this transition into digital economy. The year-on-
year growth rate of registered Internet users in India stands at an impressive 32 percent. India has
the second largest Internet user base in the world with more than 350 million users, after China
with more than 600 million Internet users and ahead of the United States with an estimated 279
million users.

For a populous country like India, any future strategy for financial inclusion will call for
technology to reach the bottom of the pyramid. To facilitate use of Internet and digital
transactions, the government can consider forming a Digital Sevak Dal a network of young
people to educate and support the Indian public in cities and rural areas to transition to a cashless
economy. The Student Police Cadet scheme in Kerala is an example where schoolchildren visit
the homes of poor and the elderly and help with e-literacy and digital transactions. Given the
large number of unemployed, and that it requires minimal investment in education, the initiative
can create major positive spin-offs.

Meanwhile, the Ministry of Telecommunication can join hands with the Ministry of Road
Transport and Highways to facilitate the laying of fiber cables to achieve greater digital
inclusion. The initiative can pay for itself, since bringing people onto digital banking platform
will prevent leakages from subsidies. A study by McKinsey finds online payment of social
benefits can save $22 billion per year.

Indias demonetization could be the push the country needs to move to digital banking, but it will
take more concerted government efforts to promote a long-term transition.

Source-

http://thediplomat.com/2016/12/indias-demonetization-time-for-a-
digital-economy/
https://www.quora.com/What-is-impact-of-demonetization-on-digital-
India
 https://www.quora.com/What-will-be-the-impact-of-demonetization-
in-India-and-how-could-it-have-been-minimized
https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetisation

Blogs:

1 Demonetization impacted 20 Trillion Human Trafficking Industry

Source- https://www.quora.com/What-will-be-the-impact-of-
demonetization-in-India-and-how-could-it-have-been-minimized

2 What will be the impact of demonetization in India and how could it

have been minimized?

The NIFTY Realty Index fell by almost 12% as a reflection, purely on sentiment. While
bellwethers are hinting at dark days ahead, these fears can at best be called unfounded when it
comes to the Indian real estate business. Let's look at how.

Commercial real estate: There will be a minimum impact on office / industrial leasing and
transactions, given that cash components do not play a significant role in such transactions.

Residential real estate: The primary sales segment is largely influenced by home finance
players, and deals tend to be facilitated in a transparent manner. This segment will, therefore, see
at best a limited impact in the larger cities, though some tier 2 and tier 3 cities where cash
components have been a factor even in primary sales will see a business crunch. The secondary
or resale market will, however, certainly be impacted, since this segment does see the
involvement of cash component.

Real estate investment markets: Projects could get stretched as informal sources of capital may
not be available. This, in fact, spells more opportunities for institutional capital. FDI, private
equity and debt players will suddenly find the market even more transparent and attractive.
Moreover, banks could start funding land transactions, thereby decelerating land prices.

Retail real estate: Retailers could see some impact on their business in the short-to-medium
term due to reduced cash transactions. The luxury segment is likely to be hit because of the
historically high incidence of cash acceptance. However, credit / debit cards and e-Wallets should
come to the rescue. Overall, the domestic consumption story remains intact, with no threat to the
overall strength and growth of the Indian retail industry.
Land sales: Where land transactions have been happening in the realm of joint ventures, joint
development or corporate divestments, will see very little impact of the demonetization move.
All of these are quite institutionalized, with little or no cash involvement. However, those
carrying out direct land deals will doubtlessly suffer - especially when it comes to agricultural
land transactions, which tend to involve significant cash involvement.

Developers: There will be minimal impact on large institutionalized players with a solid brand
and governance framework. Sales, largely driven by the salaried class or investors with limited
cash involvement would not suffer.

Smaller developers are understandably very concerned right now because many of them have
depended on cash transactions. We are very likely to see a clean-up of non-serious players due to
this surgical strike on the parallel economy. The impact of RERA will further discipline the
industry, which will be good for its health in the long term.

Hotels and hospitality-related real estate in the organized sector will see negligible impact by the
demonetization.

Source- https://www.quora.com/What-will-be-the-impact-of-demonetization-in-India-
and-how-could-it-have-been-minimized

3 The demonetized Indian- http://blogs.timesofindia.indiatimes.com/amusing-

musings/the-demonetized-indian/

4 After Day 50: The Results From India's Demonetization Campaign Are In-
https://www.forbes.com/sites/wadeshepard/2017/01/03/after-day-50-the-
results-from-indias-demonetization-campaign-are-in/#4545eb6750d1