On 8th November 2016, the government surprised the entire nation by cancelling Rs. 50 and Rs. 1000 currency notes. The decision came as a big shocker for everyone in the country. It not only affected a lot of industries but also disrupted day-to-day of lives of people. However, at the same time, this momentous decision helped unorganized industries move towards formal economy. 

The Move:

Rs. 50 and Rs. 1000 currency notes were demonetized. Thus, almost 86 per cent of currency suddenly became worthless paper.

The Aim

• Reduce corruption
• Force those who have hoards of black money to deposit it in banks
• Eliminate terror funding
• Encourage digital payments
• Move towards cashless economy

Effects

• Domestic demand for gold items suddenly increased
• Initial euphoria which led to rush for gold was followed by quick halt in buying due to cash crunch
• Jewellery markets like Zaveri bazaar in Mumbai and Zohri Bazaar in Jaipur literally came to a standstill in the following days, post 8th November 2016
• Thousands of unskilled labourers moved away from jewellery centers like Mumbai, Jaipur, Surat, etc. due to non-availability of work
• Gold demand in India, which is next only to China, tumbled to the lowest in seven years in 2016 to 666.1 metric tons.
• Smuggling came down drastically

Now

Changes

• Great transparency with the shift to digital payments

• According to reports, cash payments in the urban areas have come down to 40 per cent

• Privacy is now history

• Structural shift in demand for organized players leading strong sales; stocks of Titan Industries, PC Jewellers, TBZ increased

• Purchasing power of people has come down; however, there has been a marginal improvement in the business post relaxation of the PAN card requirement for cash sales above Rs. 50,000
• More of need-based jewellery buying is taking place
• Organised jewellery trade is flourishing
• To some extent, unaccounted over the counter sales are still happening at retail level