Impact of Demonetization on Small Businesses in Indian Economy - An Empirical Study on Small Businesses at Cooch Behar District, West Bengal

Abstract

November 8^th, 2016 was a path breaking day in Indian economy when Govt. of India has demonetized the high value currency notes and replaced with new notes of Rs.500 and Rs.2000. This move Govt. was taken to clean the black money from the market, to inspire digital economy and to reduce the ‘Cash’ payment culture of some people for tax evasion. The overnight decision changed the life of many people in India. Thousands of people they waited in long queues in front of Banks, ATMs for money. Entire social life of people throughout the country got distracted. Many poor daily wage workers were left with no job and income as owners were unable to pay their daily wage because of less cash, around 15 lakh jobs have been obsolete during this one year.

 Despite Govt. of India has taken a bold step to make India corruption free and inspire the people in cashless transaction but after one year can we say India is really corruption free? Can we observe any significant improvement in cashless transactions? Can we see the digital payments have significantly improved for common general man?

Many reports stated that Country’s automobile and real estate sectors are highly affected and World Bank has downgraded the Indian economy’s growth forecast as sharp falls. The empirical findings suggest that the impact of demonetization on GDP growth during Q3 and Q4 of 2016-17 was mostly felt in construction and real estate, but the good thing was that because of stronger growth in manufacturing, agriculture, mining and electricity the overall impact on gross domestic product growth was modest.

Many reports stated that small traders have immensely affected after demonetization because of the cash crunch and lack of infrastructure like digital payment system etc. Small traders in retail sector (grocery shops etc), service sector (restaurants, nursing homes etc.), gems and jewellery, small traders in agricultural products, SMEs, small dealers, professionals like doctors, lawyers etc, have highly affected because of demonetization during  last one year. So my objective to find out whether the small traders have really affected or not. If they are affected then how they have affected?

The main objective of this paper is to study the impact of demonetization on the small scale traders at Cooch Behar District of West Bengal and how it affected their business. As we all know that Cooch Behar is the princely state of West Bengal which is located very near to Assam, Bhutan and Siliguri region. As a district town Cooch Behar has a high significance in businesses with Northeast, Siliguri and Bhutan. I prepared a questionnaire and surveyed to 50 small scale businessmen at Cooch Behar district and tried to find their perception on demonetization and its impacts on their businesses during last one year. The study at Cooch Behar district may reflect the status of small traders for entire country.  Another objectives I have kept here to study whether demonetization really eradicated corruption from India and whether demonetization has changed the behavior of the citizens of the country in cashless transactions?