The big bath of demonetization in India: strike on black money for corporate governance
| Date | 01 October 2018 |
| DOI | https://doi.org/10.1108/JMLC-11-2017-0063 |
| Pages | 594-600 |
| Published date | 01 October 2018 |
| Author | Sandeep Goel |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
The big bath of demonetization in
India: strike on black money for
corporate governance
Sandeep Goel
Management Development Institute, Gurugram, India
Abstract
Purpose –This paper aims to focus on the concept of abolition of black money and the demonetization
movementstarted in India for cleaning black money and its impact on corporate world and Indian economy.It
discussesthe corporate governance effect of the demonetizationscheme and various policy measures takenby
the government to unearthand curb the black money in the country. It also states the challengesin its process
of implementationand implications for future.
Design/methodology/approach –It appraises and reviews the concept of demonetization and its
process in Indiasince its implementation on November 8, 2016.
Findings –The biggest positive effects of this move were eradication of stocked and staked up money,
cleansing of the financial system and improving governance in India. But its implementation had mix
outcomeswith its own challenges for future improvement.
Practical implications –The lessons drawn from the experience are expected to pave way for the
countriesat large.
Originality/value –It is an original paper on demonetization in India, and it is hoped that the lessons
learnt thereofwill pave the way for the world at large.
Keywords India, Corporate governance, Currency, Black money, Demonetization
Paper type Technical paper
Introduction
Demonetization is the process wherein the government declares the present currency
notes to be illegal tender. It refers to withdrawal of a particular form of currency from
circulation. It is expected to have a significant and immediate impact on the state of
economy. On the midnight of November 8, 2016 Indian Prime Minister, Mr Narendra
Modi, in his television address to the nation, broke the news of “demonetization”,i.e.
abolishing Rs 500 and Rs 1,000 notes from the circulation with immediate effect. They
would not be legal tender anymore. There would also be limited withdrawal of money
from the banks, including ATMs.
India is not new to demonetization becauseit has implemented first currency ban in 1946
and then in 1978. This is the third time of demonetization movement in 2016. Like any other
step, there are both pros and cons of the demonetization movement. The main reasons for
demonetizationare to control counterfeit notes and to eliminate“black economy”.
There are other countries as well which have opted for demonetization for controlling
black money. In 2015, the Zimbabwe government demonetized the dollar to control
hyperinflation in the country.Another example is when member nations of European Union
adopted Euro in 2002. The governments fixed the rate of exchange for varied national
currencies into Euros and demonetizedthe old currencies.
JMLC
21,4
594
Journalof Money Laundering
Control
Vol.21 No. 4, 2018
pp. 594-600
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-11-2017-0063
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