Discuss about the Effect Of Demonetization On Financial Inclusion In India.
The Indian government declared demonetization of the higher value currencies of 500 and 1000 ? with an aim to exhume the black cash and to control the counterfeit and corruption together with terror funding. This decision was considered as the effective way in oppose to the black money in the Indian history whose advantages could be obtained in the upcoming period. It is also analyzed that effect of this move is creating money crunch in the economy as it would directly influence day to day needs of businesses and the common man. This report presents the impact of demonetization on the business. It discusses strategies that could support to decline the negative impact of demonetization on the business.
The audience for this communication will be CEO and corporate functional leaders who are based on outside Asia of the company. They had concerned regarding demonetization crisis as it has widely affected their businesses in Asia. They had also concerned of dealing in a demonetization situation as it could impact on their business in terms of declining productivity and sales.
The audience has different knowledge regarding Asia like terrorist attacks, financial crisis, natural disaster, and unforeseen significant incident. Furthermore, earlier from this crisis, the audience have lack of understanding about demonetization. They have only aware regarding the earthquakes, tsunami and financial crisis as they make planning only regarding this. Lack of understanding about demonetization can have a negative impact on the corporate functional leaders (Singh and Singh, 2016).
The key purpose of this communication is to spread the awareness regarding the effect of demonetization and strategies to deal with this situation. It would aid the audience in making the best decision with respect to their business. This communication would be also advantageous for increasing their profitability and productivity. It would also help to decline the employee turnover rate from the organization (Rani, 2016).
Demonetization directly affected the Indian business by decline demand for products and services in the marketplace. It could more influence small business caused by each activity of small businesses could be completed by cash. The construction and agriculture department has been affected by a huge amount of transactions required cash for purchasing of raw materials and compensate to the wage laborers (Mali, 2016). MSMEs region has been affected because of daily wage and contractual employees. Most of the daily wage employees do not have their own bank account at the working place. From the demonetization, the business faces a huge cash crunch as it declines the possibility of completing daily requirements of the business. It is also analyzed that retail sector relied on the cash for taking purchasing decision. The agriculture is derived from cash as it could also be influenced by the demonetization. Demonetization has large impact on the liquidity of business (Mahajan and Singla, 2017). The immediate effect of demonetization could create complexity for CEO and functional leaders as business deals with huge amount of cash hence it cannot survive without using currency at the longer time (Sinha and Rai, 2016). Demonetization can also increase the demand of loan for filling the gap and run the business smoothly. It also demand loan and arrange the funds from banks and financial institution. Business, which operates in cash, could face complexity to get the funds because balance sheet will give a different story as well as making them unqualified for loans in a crisis situation. In addition, banks will be unwilling and highly cautious for approving the loan because they would want to eliminate the NPA’s. The cost of funding would be higher even if one can benefit the funding by other institution (Kaur, 2016).
The organization should provide mobile ATMs facility to their consumers as it would facilitate to the withdrawal of new currency values. It could also support to eliminate cash problem of individuals. The bank should enhance the cash limits for small and medium-sized enterprises as it could be effective to operate a business and eliminate the chance of cash issues among daily wage employees. The organization should use NEFT and RTGS facility as it could facilitate to do the immediate transaction for completing their requirements. In addition, it can also be suggested that organization should use e-wallet cards to the urgent financial transaction in the working place and obtain reliable outcome (Ganesan and Gajendranayagam, 2017).
The organization has introduced different measures to ease the burden of demonetization on the common man. But, there are several measures to save the digital transaction such as develop the digital literacy program, use of wallets, and subsidy scheme for a smartphone. Business should develop the digital literacy booths outside the banks particularly in the rural sector. The need of the hour is to develop the digital literacy program across all the sections of the nation because very small portions of the nation are using the phone banking and internet for daily requirements (Joshi, 2017). Since a large number of people who belongs to lower with middle class has their bank account in the government banks. Therefore, it is required to generate the digital literacy booth from outside of bank wherein different facilities are available such as opening new bank accounts and reveals the ways for making digital payment and use phone banking and internet.
The government should print more and smaller value like notes of Rs. 50, 100 and Rs. 500 hence there would be an adequate flow of money in the market. It is stated that people who have notes of Rs. 2000 are not able to exchange the same in the market because of a shortage of smaller value. The government should develop the subsidized schemes for smartphones as it is used to access the information and aids to expand the digital literacy between people. It would also enhance make in India program because the favorable impact will be seen on Indian mobile phone manufacturers (Haq, 2017).
It is evaluated that there are certain banks that have a daily withdrawal limit of maximum Rs.
10,000 per day as compared to Rs. 24,000 in their banks because people have to stand in long quos every day for withdrawal the money. Hence, the government should make sure that the adequate quantity of money is transferred through ATMs and banks in both urban and rural areas on time so that business can work efficiently. Business should update their bank of account immediately to identify their cash position. It indicates how much amount of cash balance out of capital account has been generated (Tiwari and Yadav, 2017). Business should identify the salaried person as they are hardly aware to make balance sheet (Sarkar and Dutta, 2017). It should also make a record of cash summary, net worth statement and cash flow statement. Business should focus on cash withdrawal from ATMs and bank account to arrive at the summary of cash flow. It would aid to justify the available cash in the business. Business should create the supporting documentary evidence with the intention of record as it could aid to justify the cash deposit (Miyan, 2017).
Conclusion
From the above interpretation, it can be summarized that the CEO and functional leaders will be an audience of communication towards the impact of digitalization on the business performance. It can also be summarized that audience of communication do not have prior understanding towards demonetization that could negatively impact on the organizational performance. It can also be illustrated that the demonetization could create many issues like organization productivity, employee productivity, and demand for products and services. It can also be summarized that there are many strategies that should be used by the organization to eliminate the negative impact of demonetization on the organization performance.
References
Ganesan, G., & Gajendranayagam, B. (2017). Impact of demonetization on Indian Economy. IJAR, 3(9), 433-436.
Haq, N. (2017). Study on Strategies of Digital Marketing Vis a Vis Govt. Initiative. International Journal of Engineering and management Research (IJEMR), 7(3), 264-268.
Joshi, P. (2017). Study on Demonetization and its Counter-Effect on the Common Man Life. Journal of Commerce, Economics & management, 1(2), 26-37.
Kaur, S. (2016). Demonetization and Its Impacts in India. International Journal of Research, 3(17), 1150-1154.
Mahajan, P., & Singla, A. (2017). Effect of demonetization on financial inclusion in India. 6th International Conference on Recent Trends in Engineering, Science, and management.
Mali, V. (2016). Demonetization: A step towards modified India. International Journal of Commerce and management Research, 2(12), 35-36.
Miyan, M. (2017). Statistical Review on the Demonetization in India. International Journal of Advanced Research in Computer Science, 8(5).
Rani, G. (2016). Effects of demonetization on retail outlets. International Journal of Applied Research, 2(12), 400-401.
Sarkar, A. K., & Dutta, D. (2017). Impact of Demonetization: A Study on Healthcare and Pharmaceutical Industry. International Journal of Engineering and Management Research (IJEMR), 7(3), 583-594.
Singh, P., & Singh, V. (2016, December). Impact of demonetization on Indian economy. In 3rd International Conference on Recent Innovation in Science, Technology, Management, and Environment.
Sinha, A., & Rai, D. (2016). The aftermath of demonetization on the rural population. International Journal of Research in Economics and Social Sciences (IJRESS), 6(11), 223-228.
Tiwari, A., & Yadav, S. (2017). EMERGING TRENDS IN ADVERTISING MEDIA CONSUMPTION: A SOURCE OF BUSINESS PROMOTION. International Journal of Management Research and Reviews, 7(10), 958-966.
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