Narendra Modi’s demonetisation completes 12 months: A look at 12 surprising changes

By: |
Updated: November 8, 2017 3:03:45 PM

As nation completed 12 months of demonetisation today, we bring you 12 surprising changes India witnessed after note ban.

BJP, OBC,  Gujarat polls , gujarat assembly polls, OBC communitiesNarendra Modi. (Image: Reuters)

India completed one year of demonetisation today, the historic step of Narendra Modi government to scrap higher denomination currency notes of Rs 500 and 1,000 has received a mixed bag response from several people over the course of 12 months. The bold move to ban 86% of the currency in circulation is a first of kind of exercise at a huge level ever done around the globe. The ban on Rs 500 and 1,000 currency notes were done in order to eradicate and eliminate black money out of the system and promote digital transactions.

However, it still remains highly debatable that the implementation of demonetisation was efficient or not. The reason being: such a large scale in a country as huge as India. Numerous voices have supported and opposed this major move. We bring you 12 surprising changes India witnessed after demonetisation.

Rise in ‘credit card’ spending

The use of credit cards saw a massive spike after the note ban exercise. About 57% of the cardholders doing more transactions than they did a year ago and more people want to join the plastic credit bandwagon, according to a survey. The findings are based on a survey conducted by TransUnion-Cibil, which surveyed 1,088 urban adults online between July 13 and 18.

Rs 2.11 lakh crore booster to banks

As Indian banking and financial services sector is rich with money after demonetisation which helped the government to announce a long-time awaited relief for NPA-laden PSU banks. Earlier last month in a major announcement, Finance Minister Arun Jaitley said that the cabinet has approved Rs 1.35 lakh crore for India’s ailing public banking system from recapitalisation bonds, of the total approved 2.11 lakh crore.

Stock markets hit new highs

Indian stock markets are on a rising streak right after demonetisation when a temporary slump was observed. On 21 November 2016, Sensex made a low of 25,717.93 points but from then it’s been gaining month by month. If we look at from the 52-week low (25,717.93) to a 52-week high (33,865.95) – made yesterday only, the index has returned 31.68% so far and 20.94% on a closing basis.

Record-breaking IPOs

As it has observed that fund houses and financial sector are having surplus cash with them after demonetisation, in 2017 alone, there are have 6 public offers which were subscribed more than 100 times.

Drop in auto sales

Post the announcement of demonetisation in India, the growth of passenger vehicles fell below double-digit growth and the month of December 2016 saw cumulative automobile sales in India declining to lowest in 16 years. The month of December 2016 saw India’s top-three passenger vehicle and two-wheeler manufacturers posting a decline in its sales. Pravin Shah, then President and Chief Executive, Automotive sector, Mahindra & Mahindra had clearly said these were short-term effects as buyers have postponed purchase decisions till cash comes back in circulation. Yes! This move by the government did slow down sales in the period November 2016 January 2017 and from February things were back on track.

86% demonetised — 83% remonetised

Earlier in June 2017, the Reserve Bank of India said that nearly 83% of the currency has been remonetised so far and denied there was any shortage of cash in the system.  “According to our latest data, 82.67% of the currency has been remonetised and in volume terms, it is 108%,” RBI deputy governor B P Kanungo said.

Mutual fund inflows at record high

Interestingly, in October 2016, equity mutual funds inflows stood at Rs 9,394 crore, a 16 month high back then. As anticipated the November month recorded a slight drop to Rs 9,079 crore. Since then, equity mutual fund investing in India has reached unprecedented levels crossing the Rs 20,000 crore level in August 2017, while the overall assets under management (AUM) topped the Rs 20-lakh crore mark. In April this year, Bonanza Institutional Equities Vice President Yogesh Nagaonkar said that mutual funds are not finding enough opportunities to deploy the inflow of cash post demonetisation into suitable options in the markets.

More accounts under scanner

After the record deposits in banks following the demonetisation exercise, it is evident that more accounts are under the scanner of IT (Income Tax).

Shell companies crackdown

Demonetisation exercise has directly affected the existence of paper-based shell companies which are dealing in black money and hawala transactions. In a surgical strike on shell companies, 2.24 lakh companies have been struck off. About 58,000 bank accounts belonging to 35,000 companies caught transacting Rs 17,000 crore after demonetisation. Earlier this year Indian capital market regulator SEBI (Securities and Exchange Board of India) have ordered to delist about 331 shell companies listed on Indian stock exchanges.

Spike in digital payments

After PM Narendra Modi announced the note ban, the papers next day, carried full-page advertisement by mobile wallet Paytm. “Paytm congratulates Honorable Prime Minister Shri Narendra Modi on taking the boldest decision in the financial history of independent India,” the advertisement with Narendra Modi’s face on it said. 15 days later, the newspaper headline read: Paytm touches a new record of 70 lakh transactions. Paytm, which already had a consumer base of 15 crore people and businesses even in the pre-demonetisation era, became the biggest gainer in the demonetisation exercise, while there were other mobile wallets as well such as Mobikwik, Freecharge and PayU. Soon, mobile wallets from banks and the government also made an entry.

New taxpayers

The number of new taxpayers has increased by 26.6% from 66.53 lakh in 2015-16 to 84.21 lakh in 2016-17. The number of e-returns filed increased by 27.95% from 2.35 crore in 2016-17 to 3.01 crore in 2017-18.

UP elections win

Last but nowhere the least, demonetisation has been touted as the reason for the massive landslide victory of BJP government in Uttar Pradesh state elections in March 2017. Many political analysts believe after the bold move of demonetisation by Narendra Modi led BJP government to address the issue of black money have created an optimistic environment among people. 

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1Demonetisation anniversary: FM Arun Jaitley dubs note ban as watershed moment
2India more attractive to do business than World Bank ranking suggests, says Arvind Panagariya
3Demonetisation anniversary: Small notes make it big