Demonetization is a process where the current currency loses its status. The recent demonetization that took place India on 8th November 2016 was a change that brought drastic changes in all the sectors on a global level.
The launch of new 2000 and 500 rupee notes caused a real chaos in the minds of the public and in the business market. The idea behind this step was to remove black money once and for all, and to expose whoever had this black money hidden with them.
The situation that occurred in the company were extreme. Daily there would be a long queue of public depositing their old 1000 and 500 rupee notes in exchange of the new ones. There were problems when money was not available in the bank and people who have been standing in line for the whole have been disappointed.
Due to the change in situations, transactions which include the usage of 1000 and 500 rupee notes have been reduced. It has been more difficult in the case of 500 rupee notes as there were no immediate supply of the new ones.
These two notes take up 86% of the circulation currency and the decision to ban 500 and 1000 rupee notes had brought problems among the various sectors. The sectors which got effected were, Automobiles, FMCG, Hospitality/Travel, E-commerce, Luxury Market, Gold, Entertainment, Share Market and markets globally.
Automobiles faced losses up to 50-60%, the reason behind this was that there was no way that a transaction or a deal could take place. There was no money and there were restrictions on the money being withdrawn which made the situation complicated.
FMCG the most important sector faced huge losses. The FMCG companies started facing a fall in sales which was mostly from the rural areas. The Rural Market covers 40-45% of the revenue for all the FMCG or retail focused companies.
Hospitality and travelling had become difficult which lead to a decrease in the reservations of hotels, restaurants, travel bookings and various other hospitality services. Delhi saw a loss of 28%, Mumbai of 7% and Bengaluru of 2%.
The E-commerce, Gold, Luxury Market and Entertainment faced their own respective losses. E-commerce had very few users or buyers visiting their website which lead to few clicks. Whereas, the Gold and Luxury market had to face huge losses which went up to crores and crores of rupees. The entertainment business saw a drop of viewers, which went down to 55 viewers a week.
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The demonetization had a drastic effect. Its aim was to eradicate black money but in turn its lead to huge amount of losses to the global market through market being down, common people suffering due to no availability of money from the banks and losses faced by the various corporate sectors. Finding of black money and the people behind them were small and the damages done were large.