Gideon Presentation

By Okeke Chizoba

Gideon

DEMONETIZATION AND ITS EFFECT

ON THE AGRICULTURAL

SECTOR

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Gideon Presentation

Demonetization is the act of stripping a currency unit of its status as legal tender. It is the process of ceasing to produce and circulate particular forms of currency.

This is necessary whenever there is a change of national currency. The old unit of currency is retired and replaced with a new currency unit.

What is Demonetization?

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Why Demonetization. The Financial Action Task Force, a global body that looks at

the criminal use of the international financial system notes that high-value bills are used in money laundering schemes, racketeering, and drug and people trafficking.

Unearth black money from the economy. Stall the circulation of counterfeit currency. Remove the election funding for polarization Control the inflation and price rise. Fight corruption and money laundering. Curb the funding for anti-social elements like smuggling,

terrorism, espionage etc.

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Percentage share of currencies.

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India Agricultural Sector at a Glance

• Agriculture is the keystone of the Indian economy. • Agricultural labourers account for 58.4 percent of

workforce of India. • Agricultural growth in India contracted 0.2% in 2014-

15 and grew no more than 1.2% in 2015-16, largely because of back-to-back droughts.

• The commercial transactions in this sector necessitate cash transactions on a more frequent basis .

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Agriculture Growth.• GDP From Agriculture in India decreased to 3095.38 IND

Billion in the third quarter of 2016 from 3743.90 IND Billion in the second quarter of 2016.

• GDP From Agriculture in India averaged 3899.02 IND Billion from 2011 until 2016, reaching an all time high of 5217.45 IND Billion in the fourth quarter of 2013 and a record low of 2715.05 IND Billion in the third quarter of 2011.

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Impact of Demonetization on agriculture• Agriculture was expected to grow at 4% this year according to

October 2016 CRISIL report but demonetization has disrupted this.

• This informal financial sector, which could account for a fourth of bank lending or 26% of GDP, gives as high as 71% of all rural lending.

• Sale, transport, marketing and distribution of ready produce to wholesale centers or distributors, is dominantly cash-dependent.

• Farmers have been unloading produce below cost, because no one has the money to purchase , and the winter crop could not be sown in time, due to lack of cash for seeds.

• Sales fall, increased wastage of perishables, lower revenues

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Impact of Demonetization

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Huge amount of money have been recovered by I.T department as attempt was made to make them white money.

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Any impact on the black economy?

• Black money hoarders will definitely lose out, eventually boosting the formal economy in the long run.

• Despite having many positives such as rising tax to GDP, higher GDP growth, lower inflation, higher financial savings, this demonetization move may not curb the root cause of black money.

• This initiative addresses the ‘stock’ of black money but not necessarily the “flow or fresh” creation of black money unless some mechanism is built to track the movement of the new high-value currency notes.

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THANK YOU