Impact India is to fulfill the needs of 1.324


of Demonetization on Small Retail Businesses



N* & Prashanth D*

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1st M.COM (IB)

St. Joseph’s College of Commerce,

Brigade Road, Bangalore.






Our Prime Minister Mr. Narendra Modi
demonetized the higher denomination notes of Rs.500/- and Rs.1000/- overnight
on November 8, 2016. By 2018, Indian retail sector is likely to grow at a CAGR
of 13% to reach 950 Billion USD. The main use of small business in India is to
fulfill the needs of 1.324 Billion people in India. This paper is a conceptual
study on how demonetization affected the owners of small businesses. Small
businesses include general shops, departmental stores, hotels etc. On the basis
of analysis, we understood that the decision of demonetization was widely
accepted by the traders but its planning and implementation was not at all
satisfactory. People who operate on small scale were hit the most because their
sales faced huge fall suddenly. But now most of the traders are using pay tm
and other digital methods. Hence, this study concentrates on how the
demonetization affected small business owners and how they adopted to it.









is the act of stripping currency unit of its status as legal 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 will completely replace the old currencies
with all new currencies. The opposite of demonetization is remonetization, in
which a form of payment is restored as legal tender.

 This happens when a certain currency is no
longer in regular use within the country of origin, or when a newer currency
comes into circulation. The demonetization, in India was the suddenly
announcement by Prime Minister of India on 8th November at 8.30 p.m. that 500
and 1000 notes would not be legal tender from midnight of 8th November 2016.
The announcement was made much after banking hours thus giving nobody a chance
for any foul play.

The Reserve
Bank of India (RBI) data suggests that the proportion of `500 and `1000 notes
were 86.4% of total value of notes in circulation on March 31, 2016, amounting
to `14 trillion. A lot of this money was also considered to be fake money
pumped into the economy to fund terrorist activities. At the stroke of midnight
of 8th November 2016, India lost 86.4% of its monetary base. In this single

In this paper we are going to analyze post demonetization
effect on the small business and also small business firms affected very large
extent in Country. Our paper explains how they adopted to demonetization and
shows their current status.




Literature Review:


Anjali Vig Kapoor (
Hindustan Times 2016) reveals that the Retail Sector has taken an initial
beating but is definitely hoping for a swift renaissance with the growing
flexibility shown by their customers in making digital payments. The transition
for big retailers to adopt the digital path is not going to take much. The
problem lies with the small retailers. But, we also have been surprised at the
keen adoption of digital payment by a handful of local fast-food vendors in
almost every city in the country. Small Retailers can definitely take a leaf
out of their book.


Dr M Thangavel (Times Of India 2016) discusses that a lot has changed in the Retail Sector ever since demonetization was
announced. Despite hardships, the transition to digital till now has been
nothing short of overwhelming. Only time will tell whether the Indian economy
will ever lose its’ propensity to deal in cash or whether the digital realm
will take over and completely change the face of Indian Retail.


Mr Gupta ( Indian Retailing
2017) prevails
that the policies and strategies that the government has been pursuing
in the context of recent initiatives or need to take up in future, in order to
address the further issue of demonetization, black money and corruption in
public life. Demonetization process is like a two face of a coin. It has both
sides, positive as well as negative. The positive will benefit the nation and
the other will create some temporary and long term problems. A single person
cannot fight for the nation’s good. Everyone should cooperate and put hands
together in abolishing the black money and parallel economy.



Neena Marina (APJR 2017) discusses that the
demonetization policy has been taken by the PM in an attempt to resolve against
corruption, black money and counterfeit notes. On the basis of analysis, we
understood that the decision of demonetization was widely accepted by the
traders but its planning and implementation was not at all satisfactory. People
who operate on small scale were hit the most because their sales faced huge
fall suddenly. But now most of the traders are using pay tm and other digital
methods. As a measure the government can promote and make available more online
facilities to small traders.



Ms Deepthi (Economic Times) talks about the
process of demonetization laid down impact on business activity for small
traders but the sentiments for government’s move of demonetization was welcomed
by small traders and they adopted disruptive new technology in payment mode by
accepting more plastic money & virtual wallet. Direct to consumer segments
has beard some loss of business but indicated that they were moving towards normalcy.



Mr Tarique Mansuri (Chief
Marketing Expert, Cryptocurrency Expert)  says that The
organized retail industry in India, which consists about 5% of total retail
market, is estimated to touch 15% by 2025 — and the recent push by Govt to use
digital payments could make the organized retail sector reach 20% of the total
retail industry in India by year 2025. Reliance will be the most dominant
retail industry by 2020.



Prithvi Mathur (Assistant Professor,
Birla Institute Of Technology) discusses that the Indian Economy is
cash oriented economy. The customer’s preferential mode of payment is cash. The
Indian customers are not much attracted towards virtual buying. On 8th Nov.,
2016 the Honorable Prime Minister of India, Mr. Narendra Modi announced the demonetization
of 500 and 1000 rupees notes from the Indian Market. Our Economy was shattered
at the moment that decision was announced as the economy consist of major two
section that is below poverty line and esteem group. Both Section of the
society got affected as the esteem section had ample money in the denomination
of 500 and 1000 rupees and below poverty line were having limited money to run
their livelihood for particular period. This decision had affected the sales
and purchasing behavior of the customers till date. This decision is an
innovative promotional step towards the organized retailing in the Indian
Retail Industry.








1: To study how the retail owners adopted to Demonetization.

2: To
understand the impact of demonetization from the perspective of small scale
retail entrepreneurs.

3: To know how demonetization
effects the technological advancement of SME sector.



Research Methodology:

Nature of the study: This research follow the questionnaire method and it also
an Empirical Paper.


Methodology: The present study is based on both primary data and secondary
data. Primary data are collected through questionnaires which are distributed
at random to 120 vendors according to convenience.





Types of Shops:


Inference: The above data shows us the types of shows which used for this research,
where 26.4% of the shops were hotels and there are lots of other stores which
were used for our research.


Affect In

Inference:  The above data shows that 51% of
the small retail owners agreed that there was a change in the sales of their
business after demonetization.






Inference: The above data shows the yearly income of the retail shops before


Inference: In this we can see that there’s a lot of change compared to the above
picture. In this data we see that the small retail business owners yearly
income reduced after demonetization.





Inference: The above data shows that 63% of the retail owners said that there was
an effect in their supply chain after demonetization.




above data shows that for how long the small retail business owners suffered
demonetization effect.


Methods Opted:

The above data shows that the methods used my small business owners to cope up
their loss after demonetization.



Here, from the above research we found that
demonetization surely affected the retail sector in India.
to small business owners their profit before demonetization was pretty good,
but after demonetization we saw a drastic change in their profits. According to
our research a few retail shops closed down their shops after demonetization.

There were many methods adopted by small retail owners
after demonetization. Some retail shops faced loss for over an year. Most of
the retail shop owners did not like the concept of demonetization. They said it
was a flop plan. Some also said that it was a good move by government but there
were no precautions taken by them before the big move

As a result small shop owners chose digital payment
method. This also helped to promote some digital wallets like Paytm, Mobikwik
etc. This changed the mode of transactions in India. Hence, we conclude that
the small business owners suffered a loss after demonetization but they started
to get adopted to the change in cashless economy.



1. Partap
Singh. 2013.Depreciation of Rupee in Indian Economy: An Analysis, “International
Journal of Innovations in Engineering and Technology (IJIET)”, Vol. 2 Issue 4
August 2013 332, (ISSN: 2319 – 1058)

2. Tokunaga,
Howard (1993). The use and abuse of consumer credit: application of
psychological theory and research. Journal of Economic Psychology, 14, 285-316.