ELK Asia Pacific Journals - 978-93-85537-02-8
NMC -2017
IMPACT OF DIGITALIZATION IN ECONOMY AND THE EFFECTS OF
DEMONETIZATION: AN OVERVIEW
Dr. Mansi Shukla
Assistant Professor
Avadh Girls ‘Degree College, Lucknow
ABSTRACT
It’s about thirty five years ago businesses in India
began experimenting with Information Technology
(IT). The digital economy is not simply about moving
business transaction from face to face to online, but
it’s about transforming the many facets of business
interactions and transactions and enabling
innovations too. Exponential technology advances,
greater consumer power and increased competition
mean all industries face the threat of
commoditization. India stands on the threshold of
growth in Internet and e-commerce activity. The
digital economy has changed the working of business
in today’s world. While big corporations have greatly
adapted to the changing scenario, small businesses
are still finding it difficult to accept and get used to
the digital economy. To be able to stay afloat in the
industry, even small businesses have to become tech-
savvy and hire staff that is well aware of the digital
world. Now every business from an online clothing
store to a software provider to a physical store needs
to be tech-savvy and application based. Along with
the impact of digitalization in the economy,
demonetization has also a major effect in this
economy since 8th November 2016. Demonetization
is a generations’ memorable experience and is going
to be one of the economic events of our time. Its
impact is felt by every Indian citizen. The
term demonetization has become a household name
since the government pulled the old Rs 500 and Rs
1,000 notes out of circulation. Since November 8,
every Indian has only one thing on mind: the
dilemma of choosing a safe, secure, convenient and
Ms. Shilpi Bose
Part-Time Lecturer
Avadh Girls ‘Degree College, Lucknow
cashless payment option. Currently available
cashless payment systems include credit/debit cards,
e-wallets such as Paytm, Unified Payment Interface
(UPI), IMPS, USSD, RTGS, and NEFT.
Demonetization has possibly been the single biggest
policy brand this country has seen in 2016. It
certainly was bigger than GST from an impact
perspective. It is a policy initiative that in its current
state looks terrible on implementation and weak on
intent.
Keywords: Demonetization, Digitization, Money
THE TWO D’S (DIGITISATION AND
DEMONETISATION) EFFECT AND
IMPACT
The recent currency demonetization
announcement has fuelled many mobile wallet
companies to drive Indian to adopt digital
payments and thus accelerate away from cash and
other alternatives. From the ancient time, money
has played an important role in our lives. The
way money is perceived has changed- barter
economy to currency, and now money’s form has
changed from notes to plastic money to digital,
but most important its role is irreplaceable. The
convenience of less cash has been well utilized by
technology and today, that is what is driving us to
adopt digital payments. The adoption of digital
wallets in recent times is a sign of consumer
maturity; they too want friction free movement of
money. Since November 8, every Indian has only

one thing on mind: the dilemma of choosing a
safe, secure, convenient and cashless payment
option. It was told to the nation as an attack on
unaccounted money is now being trumpeted as an
honest effort to move towards a cashless
economy. Every week one slogan took the 'top of
pop' charts. The one slogan that retained the
highest top billing was 'short term pain and long
term gain'. (Reports as per 12th January 2017 BW
Business world). The importance of physical
currency has visibly reduced, as it has been easily
substituted with the use of plastic money, which
includes debit, credit and prepaid cards, which
are widely accepted across several points of sales.
Though cash will continue to play the major role
in our lives, even as we may look at alternatives
to it, e.g. a loaded e-wallet etc.
It’s good to adopt new changes and move with the
world, but all good things come with some
limitations too. A problem that we could face as
we increase our dependencies on low cash and
move towards digital is the possibility to moving
to a much lower interest rate regime.
T.R Ramachandran, Group Country Manager-
India and South Asia, Visa quoted that:
“The success of India’s cashless journey needs
two key ingredients: increased consumer
awareness and larger acceptance network”.
India is at the stress point in its payment
digitization journey. Innovations in form factors,
technology and measures like the Bharat Bill
Payment System, Payments and Small Finance
Banks acts as a building block of less cash
society. There are multiple banking apps for
different customer segments and their varying
needs. For example Bharat Banking work without
data to help users to make small payment without
data connectivity.
ELK Asia Pacific Journals - 978-93-85537-02-8
NMC -2017
IMPACT OF DEMONETISATION
 Liquidity crunch (short term effect)
 Welfare loss for the currency using
population
 Consumption will be hit
 Loss of Growth Momentum
 Increase in bank deposits and reduction of
interest rate on home loans
 Elimination of black money
 Fake currency notes became redundant
 Increase in the collection of indirect taxes(
for.eg service tax)
About thirty five years ago, businesses in India
began experimenting with information
technology (IT). By integrating IT into their
businesses, they gained greater visibility across
functions, automated several links in the value
chain and started delivering standardized value to
customers at competitive price points. The
Digital India programmer has been taken up
across multiple industry verticals and
departments. Many government departments
migrating their systems and services online, this
definitely increases the democratization of
technology and promises easy access to various
government services across the India. The basic
idea of digital economy meant more benefits for
workers in the form of less work, that too from
home with digitization allowing them to work on
their computer (with the help of a network). The
impact of digital innovation has become more
obvious in the last few years with ecommerce
sales seeing a major boost. Every business from
an online clothing store to a software provider to
a physical store needs to be tech-savvy. The
digital world has and will continue to change
social trends, which in turn directly affects
consumer behavior and demands. Customers are
no longer comparing brands with their direct

competitors, but rather all brands they consume,
no matter the industry or product. It has become
easy for the customers to complain about bad
service, means now it’s much harder for brands
to satisfy customers’ wants and needs. Customers
place a large emphasis on the ease of service, and
if this is not met they will take to digital media to
complain and let others know of their
misfortunes.
Digital transactions through online payments and
e-wallets have already multiplied several-fold in
the past two months. BHIM (Bharat Interface for
Money) is a Mobile App developed by National
Payments Corporation of India (NPCI), based on
the Unified Payment Interface (UPI). It was
launched by Narendra Modi, the Prime Minister
of India, at a Digi Dhan programme at Talkatora
Stadium in New Delhi on 30 December 2016.
Currently available cashless payment systems
include credit/debit cards, e-wallets such as
Paytm, Unified Payment Interface (UPI), IMPS,
USSD, RTGS, and NEFT. The launch of BHIM
on Android phones will take the cashless
economy to small towns, especially once
Aadhaar-enabled money transfers are made
possible without the use of even a phone.
Digital technologies are touching and
transforming all aspects of the insurance industry
too including backend operations , all of which
translates into offerings for the customer that are
relevant, simple and convenient.. Customers can
be better informed and can evaluate before taking
a decision. A customer no longer has to depend
on the financial advisor or visit a branch. With the
introduction of mobile wallets and banking apps,
it has become exceptionally easy for people to
make cashless transactions, replacing cash at
most places. Any transaction made using a digital
medium leaves a digital footprint, means the data
ELK Asia Pacific Journals - 978-93-85537-02-8
NMC -2017
providing opportunities for a smart marketer to
personalize and make relevant offerings.
Demonetization has pushed millions of new users
onto the country’s digital economic grid by
virtual fiat. New bank accounts are being opened
at a heightened rate, e-payment services are
seeing rapid growth, cash-on-delivery in e-
commerce has crashed, and digitally-focused
sectors like the online grocery business have
started booming. The vegetable vendors on the
streets have made up Paytm wallet account and
they have swiping machine in their shop where
someone can scan the bar code and make the
payment.
Modi’s demonetization initiative has been a boon
for India’s e-payment providers. Paytm reported
a three-time surge in new users -- tacking on over
14 million new accounts in November alone.
While Oxygen Wallet’s daily average users
increased by 167% since demonetization began.
We have suddenly seen a spike in both app
downloads & merchant registrations. This spike
is now coming from all cities, big and small, pan-
India, consisting of small merchants like
vegetable vendors, Kirana shopkeepers [small
convenience stores], street vendors, rickshaw
drivers, taxi’s etc., who’ve signed onto Oxygen
Wallet app for the merchant payments service.
Digitization and cash lessness will clearly
increase the banked population in the economy,
and along with that it will lead to higher banking
transaction intensity and revival of dormant bank
accounts in the existing banked population
BIBLIOGRAPHY
 Outlook Money – Issue January 2017
 BW Business World
 Internet