Demonetization SSI Report

GOVERNMENT OF KARNATAKA
EVALUATION OF EFFECTS OF DEMONETIZATION ON

SMALL SCALE INDUSTRIES IN KARNATAKA
KARNATAKA EVALUATION AUTHORITY

DEPARTMENT OF PLANNING, PROGRAMME MONITORING AND STATISTICS
JULY 2019
EVALUATION OF EFFECTS OF DEMONETIZATION
ON SMALL SCALE INDUSTRIES IN KARNATAKA
PRINCIPAL INVESTIGATOR
DR. PUTTASWAMAIAH S
HYDERABAD KARNATAKA CENTER FOR ADVANCED LEARNING

GULBARGA
KARNATAKA EVALUATION AUTHORITY

DEPARTMENT OF PLANNING, PROGRAMME MONITORING AND STATISTICS
JULY 2019
©Karnataka Evaluation Authority, 2019
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CONSTITUTION OF INDIA
PREAMBLE
WE, THE PEOPLE OF INDIA,

having solemnly resolved to constitute India into a
SOVEREIGN SOCIALIST
SECULAR DEMOCRATIC REPUBLIC
and to secure to all its citizens:
JUSTICE, social, economic and political;

LIBERTY of thought , expression,
belief, faith and worship;
EQUALITYof status and of opportunity;

and to promote among them all
FRATERNITYassuring the dignity of the

individual and the unity and
integrity of the Nation;
IN OUR CONSTITUENT ASSEMBLY

this twenty-sixth day of November, 1949, do
HEREBY ADOPT, ENACT AND GIVE TO

OURSELVES THIS CONSTITUTION.
Acknowledgement
The “Evaluation of Effects of Demonetization on Small Scale Industries in Karnataka”

was compiled with efficient analysis of primary and secondary data obtained from the
valuable information contributed by beneficiaries of the scheme selected from Bangalore
Urban & Kalaburagi districts of Karnataka. HKCAL would like to acknowledge the
following persons for their valuable contribution in evaluation of this report
Shri. Sudarshan G.A, IFS, Chief Evaluation Officer, Smt. Smita Bijjur, IFS and Smt.
Vanashree Vipin Singh, IFS, Former Chief Evaluation officer, Karnataka Evaluation
Authority, Govt. of Karnataka.
Smt. Chaya Devagaonkar Consultant (Evaluation) and Smt. Jyothi S Jenni, Associate Director,
Karnataka Evaluation Authority. Govt. of Karnataka.
The Commissioner of Karnataka State Small Scale Industries Association, (KASSIA)

Bengaluru. Govt. of Karnataka.
We thank all the concerned officers and Staff of KASSIA and HKCAL Principal Investigator
Dr Puttaswamy S. and his team deserves all accolades for their contribution and time in
taking up the Evaluation of the Scheme.
President
HKCAL, Kalaburagi
Contents
Sl. No. Title Page No.

Executive Summary……………………………………….……… 1
I Introduction……………………………………………………… 7
1.1. Definition of Demonetization……………………………… 9
1.2. Demonetization across Countries………………………...… 10
1.3. Demonetization in India……………………………………. 11
1.4. Review of Studies on Demonetization……………………. 14
1.5. Need for the Study…………………………………………. 20
1.6. Evaluation Framework…………………………………....... 21
1.7. Scope and reference period of evaluation…………………... 21
1.8. Stakeholders and audience………………………………….. 21
1.9. Objectives of the study……………………………………... 22
1.10. Evaluation questions and sub questions…………………... 22
1.11. Source of data……………………………………………... 22
1.12. Indicators………………………………………………….. 23
1.13. Evaluation methods and techniques………………………. 23
1.14. Data and information sources……………………………... 23
1.15. Sample and sampling design……………………………… 24
1.16. Data collection tools………………………………………. 24
1.17. Method of data analysis………………………………........ 25
1.18. Limitations……………………………………………........ 25
II Small Scale Industries in India and Karnataka…………………… 27
2.1. Number of MSMEs in India………………………………... 28
2.2. Industrial Scenario in Karnataka…………………………… 28
III Characteristics of Small Scale Industries in Study Area and
Views on Demonetization………………………………………... 31
3.1. Number of Factories and Employment in Study Districts….. 31
3.2. Profile of Small Scale Industries selected for the Study…… 35
3.2.1. Establishment Period of Small Scale Industries………….. 37
3.2.2. Spread of Market Area of SSIs…………………………… 38
3.2.3. Investment of Small Scale Industries in the Study Area…. 39
3.2.4. Revenue Pattern of Small Scale Industries ………………. 39
3.3. Demonetization: Problems and Coping by Small Scale
Industries…………………………………………………… 41
3.3.1. Source of information on demonetization…….………….. 41
3.3.2. Nature of Difficulties during Demonetization……….…… 42
3.3.3. Managing cash inadequacy during demonetization…….… 44
3.3.4 Relation between entrepreneurs and banks during
demonetization…………………….…………………………….. 45
IV Impact of Demonetization on Production, Sales, Revenue and
Employment of Small Scale Industries………...…………………. 47
4.1. Impact of Demonetization on Revenue of SSIs………..…..... 49
4.1.1. Impact on Other Mining and Quarrying SSI Units…….….. 50
4.1.2 Impacts on Manufacture of Food Products and Beverages
Units………………………………………..………………..….. 52
4.1.3. Impacts on firms in Manufacture of Wearing Apparel,
Dressing and Dyeing of Fur ……………………………….…….. 53
4.1.4. Impact on Manufacture of Paper and Paper Products….... 54
4.1.5. Impact on Demonetization on Printing related SSIs…….. 55
4.1.6. Impact of demonetization on SSI Units of chemicals and
chemical products ………………………………………………. 57
4.1.7. Impact on firms manufacturing rubber and plastic products 58
4.1.8. Impact of demonetization on SSI units of manufacture of
fabricated metal products, except machinery and equipment ….. 60
4.1.9 Impact on Production and Revenue of firms related to
Manufacture of Machinery and equipment Non Electrical
Components ……………………………………………………. 63
4.1.10 Impact on firms in Manufacture of Electrical Machinery
and Apparatus ………………………………………….………. 65
4.1.11. Impact on firms manufacturing furniture……………..... 66
4.1.12. Impact of Demonetization on Revenue of all SSIs
together………………………………………………..……....... 68
4.2. Impact of demonetization on employment…………….…… 72
4.3. Opinion on demonetization and its effects on SSIs…….…... 73
4.4. Case Studies on Impact of Demonetization………...……….. 74
4.5. Overall Views of Entrepreneurs on Demonetization
emerged during Focussed Group Discussion……...................…. 75
V Conclusions and Suggestions……………………………………... 79
5.1 Introduction……………………………………………….. 79
5.2. Objectives and Approach…………………………………. 80
5.3. Views of SSI entrepreneurs on demonetization……….….. 82
5.4. Findings of the Study……………………………………... 83
5.5 Policy suggestions……………………………………..…… 85
5.5.1. Urban area……………………………………………… 85
5.5.2. Rural areas……………………………………………… 86
Appendices
1 List of References Cited in the Report…………………………. 87
2 Withdrawal of Legal Tender Character of existing ₹500/- and
₹1000/- Bank Notes……………………………………….……. 89
3 Banknotes in Circulation………………………….……………. 109
4 Questionnaires on Evaluation of Effects of Demonetization on
Small Scale Industries in Karnataka……………………………. 111
List of Tables
Table Title Page No.

No
1.1 Electronic Payment Systems - Representative Data (Updated as on 13
March 06, 2018)
1.2 Sample Design of the study 24
2.1 Number of Small Scale Industrial Units in Karnataka (up to 2016-17) 29
3.1 Number of Factories and Employees, as on March, 2015 32
3.2 Number of Industrial Estates, Sheds and Plots (as on March, 2015) 33
3.3 Number of Small Scale Industrial Units in Karnataka (up to 2016-17) 33
3.4 Small Scale units registered in District Industrial Centre as on March, 35
2015 Districts
3.5 Number of SSI units 36
3.6 Distribution of SSIs in the study area according National Industrial 36
Classification
3.7 Year of Establishment of SSIs 37
3.8 Extent of Marketing Area SSIs in study area 38
3.9 Investment of Small Scale industries in the study area (Rs.) 39
3.10 Average revenue of SSIs between 2011 – 12 and 2016 – 17 (Rs.) 40
3.11 Source of information on Demonetization 42
3.12 Difficulties faced during demonetization 43
3.13 Managing cash inadequacy 44
3.14 Interaction with banks during initial days of demonetization 45
4.1 Impact of demonetization on production 47
4.2 Impact of Demonetization on Sales of SSIs 48
4.3 Production and Revenue in firms of category Other Mining and Quarrying 51
4.4 Production and Revenue in firms of Manufacture of Food Products and
Beverages 52
4.5 Production and Revenue of firms in Category Manufacture of Wearing
Apparel, Dressing and Dyeing of Fur 53
4.6 Manufacture of Paper and Paper Products 55
4.7 Publishing, Printing and Reproduction of Recorded Media 56
4.8 Manufacture of Chemicals and Chemical Products 57
4.9 Manufacture of Rubber and Plastic Products 58
4.10 Manufacture of Rubber and Plastic Products 60
4.11 Manufacture of Fabricated Metal Products, except Machinery and Equipment 61
4.12 Manufacture of Fabricated Metal Products, except Machinery and Equipment 62
4.13 Production and Revenue in firms related to Manufacture of Machinery and 63
Equipment N E C
4.14 Production and Revenue in firms related to Manufacture of Machinery and 64
Equipment N E C
4.15 Production and Revenue of firm in Manufacture of Electrical Machinery and 65
Apparatus
4.16 Production and Revenue in firms Manufacture of Furniture 67
4.17 Revenue across industrial categories (NIC based category and Revenue Rs. 69
in Lakh per firm)
4.18 Impact of demonetization on employment 72
4.19 Impact of demonetization on permanent workers 73
List of Graphs
Graph No Title Page No.

3.1 Number of SSI units and employment in Karnataka (in per cent) 34
3.2 Year of establishment of SSIs (in Per cent) 38
3.3 Pattern in average revenue of SSIs (Rs.) 41
3.4 Difficulties during demonetization (per cent) 43
4.1. Impact of demonetization on production (in per cent) 48
Executive Summary
Executive Summary
Money is backbone of transactions in modern economies, playing roles

like medium of exchange, store of value and unit of account. Monetary policy
determines supply and demand for money and changes in monetary policy
affects them. Government in India introduced a major monetary policy change
in November 8, 2016 by demonetizing specified currencies, i.e. Rs. 500 and Rs.
1000, with objectives of (1) eliminating fake currency, (2) eliminating black
money, and (3) controlling subversive activities. Specified currencies were to
the tune of 86.4 per cent of total currencies in circulation. Hence, government
introduced demonetization to meet above mentioned objectives, besides moving
towards cash less economy using modern technology based electronic
transactions.
Demonetization is a monetary process of stripping a currency unit of its

legal tender status, which results in withdrawing currency from circulation.
Demonetization has been introduced in various other countries also over time to
meet different objectives like controlling excess liquidity, inflation, black
money, etc. In India during the initial days of demonetization people
experienced difficulties in exchanging old currency to new currency, which was
accentuated by inadequate supply of new currencies. It was reported by media
that people stood in long lines in front of ATMs and banks to obtain new
currencies. It was observed that demonetization promoted digital transactions
and payments through electronic payment system increased. Keeping in view
impacts of demonetization on all sectors of the economy, this study tried to
analyse impacts of demonetization on SSIs in Karnataka.
Review of literature illustrated limited number of studies on small scale

industries. Some of the available studies are narrow in coverage of issues and
Karnataka Evaluation Authority | 1

Evaluation of Effects of Demonetization on Small Scale Industries in Karnataka
samples. Hence, this study tried to fill this gap on impacts of demonetization on
SSIs.
This study has been conducted in Karnataka, which has 3.82 lakh SSI
units employing 22.77 lakh people. Objectives of the study were to understand
need and context for demonetization in India, study revenue of SSIs, examine
impacts demonetization on production, sale and employment during
demonetization. This study is limited to SSIs in Karnataka only and the
reference period is April 2016 to May 2017 and used both secondary and
primary data. Primary data were collected from study districts Bangalore Urban
and Kalaburgi, respectively representing urban and rural areas, canvassing
structured schedules among 235 SSI units.
Small scale industries in India have been renamed as micro, small and
medium enterprises and been classified on the basis investment in
manufacturing and service sectors. Among 634 lakh units, large number of
MSMEs are micro units at 630.52 lakh, where Uttar Pradesh and West Bengal
have large number of MSMEs and Karnataka has over 38 lakh units.
Karnataka is an important industrial state promoting high technology

based, capital intensive and knowledge based industries. MSMEs constitute a
significant place in Karnataka, with over 4.8 lakh registered units employing
over 28 lakh people during 2014.
The study observed that Karnataka has 13959 factories, including

readymade garments, textiles, chemical and engineering employing over 15
lakh people. Bangalore Urban district has over 43 per cent of factories, while it
is around 1 per cent in Kalaburgi. Karnataka has 176 industrial estates thus
encouraging industrial growth. The state has 3.82 lakh SSI units providing
employment for 22.77 lakh people, out of which Bangalore Urban district has
largest share.
2 | Karnataka Evaluation Authority

Executive Summary
Large number of MSMEs, 62 per cent, in the study area were established
during the period 2001-10, which might be due to changes in industrial policies
to capture opportunities provided by economic reforms. Majority of SSIs (84
per cent) under study had markets in few districts around their location, which
indicates SSIs meeting local demands. Establishment cost of SSIs was on an
average over Rs. 1.5 crores from both districts together, indicating large number
units in the category of small scale industries according to the MSME
classification. Average revenue of SSIs declined from Rs. 5.16 crores in 2011 –
12 to Rs. 4.41 crores in 2016 – 17, due to reduction in demand, lack of financial
support, increased competition were factors as expressed by entrepreneurs.
Demonetization was an unexpected move by the government as opined

by 93 per cent of respondents and electronic media like television are major
medium of communication about demonetization. SSIs faced problems in day to
day transactions due to reduction in cash availability, which affected salary
payment (26 per cent of SSIs) to employees, purchasing of raw materials (6 per
cent), etc. The impact was more in rural areas as observed in Kalaburgi district.
Entrepreneurs adopted measures like using cash in hand (14 per cent) to borrow
loan to meet their requirements of cash and cash usage is more in Bangalore
than Kalaburgi.
Large proportion of entrepreneurs (22 per cent) faced problems while

transacting with banks, but the point to be noted is that even 22 per cent is not a
small proportion as they have faced problems with banks during
demonetization.
Demonetization process adversely affected production of SSIs (25 per

cent) and it was more (70 per cent) in Kalaburgi, which experienced decline in
production. Further, sales in 25 per cent of SSIs reduced during demonetization
due to declined production and also non-availability of cash. The reduction was

more in rural areas (Kalaburgi – 70 per cent of SSIs). The average revenue also
fell sharply during demonetization, from Rs 484.6 lakh in October 2016 and
declined to Rs. 379.67 lakh in November 2016. The study reveals that
demonetization created negative impacts on production, sales and revenue of
SSIs.
On employment side demonetization impacted adversely on temporary

job workers (14 per cent of SSIs) as entrepreneurs had to stop engaging
temporary workers due to non-availability of cash. Loss of temporary
employment is high in Kalaburgi district (40 per cent), which shows
vulnerability of rural less skilled labourers during sudden shocks. The study
observed relatively large number of entrepreneurs (34 per cent) opining
demonetization as not a good move as it adversely affected production and
revenue of SSIs.
Demonetization affected private money lenders and this in turn affected

SSI owners also, explaining the need to strengthen financial system to meet
needs of SSIs. Further, SSIs which function on job work basis suffered more as
most of them deal in cash. Impact of demonetization was more on recently
started firms due to non-availability of money. Entrepreneurs faced problem to
pay for their staff and hence some of them relieved their daily wage labourers.
Overall, entrepreneurs felt that sudden implementation of demonetization
created confusion and problems while severely affecting their business.
Findings of this short term study on impacts of demonetization on SSIs

leads to the following policy suggestions.
Demonetization has promoted use of electronic payment system, hence

monetary literacy, in terms of reducing cash usage in transactions and adopting
electronic methods of payments may be promoted.

Executive Summary
Use of electronic methods of payments has increased finance related

cyber-crime, indicating the necessity of taking adequate security measures to
control finance related crimes.
Growth of industries need to be promoted in other districts also to create

employment opportunities particularly in rural areas.
SSIs should be encouraged in all districts to meet demands of these

regions.
Inadequate financial support was a major reason for the difficulties of

entrepreneurs and hence this problem needs to be addressed by creating
financial institutions that help SSIs.
Any policy change will immediately impact on vulnerable groups like

casual and less skilled labourers. Hence, efforts should be taken to protect these
groups from adverse impacts of policy changes.


Introduction
Chapter I
Introduction
Money plays significant role particularly in economic life of human

beings. In modern economies production and consumption activities have
increased manifold, increasing transactions or exchanges of goods and services
between suppliers and consumers. Money has been facilitating to carry out these
exchanges smoothly. This indicates that money is a medium of exchange and is
backbone of modern economic activities. Economic theory, broadly, defines
money as a medium of exchange, store of value, and unit of account - as a
medium of exchange money is used to pay for goods and services; as store of
value it transfers purchasing power from present to future; and as unit of
account provides way for fixing prices. These different functions are carried out
through various forms of money such as currency with public, deposits in banks
and post offices. People prefer to hold currency or cash in hand for transactions
because of its high liquidity. According to Reserve Bank of India 13.46 per cent
of money was in the form of currency with the public as on January 18, 2019
(Reserve Bank of India – Website). Volume and supply of money is monitored
by monetary policy of the country as per financial requirements of economy.
Any changes in monetary policy will alter financial system and affect the
economy.
Money is backbone of modern economies which are based on expanded

markets, i.e., producers and consumers with increased volume of transactions.
Modern economies are in the process of fast movement towards digital
economy, where information technology is paving way for electronic
transactions of money. This technological development has been enabling
countries to adjust their monetary policies to meet various needs of the
economy. In this regard, Indian government also introduced a major change in
its monetary policy to attain different objectives.

Government of India announced a major change in monetary policy,

demonetization, on 8th November, 2016 by withdrawing Rs. 500 and Rs. 1000
notes from circulation (GOI 2016 – Ministry of Finance - Gazette of India, No.
2652; Reserve Bank of India Circular in Annexure 1). Subsequently Reserve
Bank of India, on the basis of Government of India Gazette, issued a circular
stating “In terms of Gazette Notification No 2652 dated November 08, 2016
issued by Government of India, 500 and 1000 denominations of Bank Notes of
the existing series issued by Reserve Bank of India (hereinafter referred to as
Specified Bank Notes) shall cease to be legal tender with effect from November
09, 2016, to the extent specified in the Notification. Further, it stated that a new
series of Bank Notes called Mahatma Gandhi (New) Series having different size
and design, highlighting the cultural heritage and scientific achievements of the
country, would be issued (RBI 2017).
Major objectives behind this move as specified by the government were:
(1) Elimination of fake currency – stated that the fake currency of above
denomination notes are largely in circulation, identification of fake and genuine
bank notes has become difficult and use of fake currency is causing adverse
impacts on the economy;
(2) Elimination of black money – stated that high denomination bank notes
have been used for storing unaccounted wealth, which has come to light
because of large cash recoveries made by enforcement agencies;
(3) Control of subversive activities – said that fake currency has been used for
financing subversive activities like drug trafficking and terrorism, which is
causing damage to economy and security of the nation.
In the background of above objectives Government of India ceased Rs.

500 and Rs. 1000 notes as legal tender with effect from 9 th November, 2016. It

Introduction
was stated that high denomination money was used for creating black money
and subversive activities. In this respect the Government aimed at curbing these
illegal activities by removing existing high denomination currencies and
replacing them with new currencies, a move which could also reduce fake
currencies. On the eve of demonetization, in terms of value, as per the Annual
Report of Reserve Bank of India (RBI - 31 March 2016) in March 2015 and
March 2016 high denomination currencies, i. e, Rs. 500 and Rs. 1000 accounted
for over 85 per cent and 86.4 per cent of total currencies in circulation, which
indicates that high denomination currency was significantly large in circulation.
Keeping this in view, Government of India introduced demonetization, initially
stating to control cash transaction and later it was said that demonetization is for
reducing cash circulation, encouraging digital payments and making Indian
economy less cash dependent.
Demonetization is not new in India as Indian Governments had

demonetized currencies earlier also where in January 1946 and January 1978
higher denomination banknotes of Rs. 1000, Rs. 5000 and Rs. 10000 were
withdrawn from circulation.
1.1. Definition of Demonetization
Demonetization is a monetary policy where a certain currency unit ceases

to be used as a form of legal tender. Further, it is an act of stripping a currency
unit of its status as legal tender. Governments take decisions to stop circulation
of some denominations or completely replace old currency for various reasons.
During demonetization process demonetized currency is withdrawn from
circulation and deposited in banks and replaced by currency which is in
circulation or with new currency. Demonetization is also referred to as the
process of moving people from a cash-based transaction system to a cashless
transaction system. Nowadays governments and financial institutions

discourage people from keeping hard cash as it helps in evading tax, reducing
deposit base of financial institutions and may increase public debt. In this regard
demonetization has been defined as ending something that is no longer legal
tender in a country or when a currency notes of a particular denomination
ceases to be a legal tender it is called as demonetization (Rebello, J. and Gayatri
N. (2016 Nov 29).
Generally, demonetization is implemented for various factors such as

combating inflation, removing corruption and criminal activities (counterfeiting,
tax evasion), discouraging cash dependent economy, facilitating trade, and
controlling circulation of black money and other unaccounted money.
Demonetization is a process with multi-dimensional impacts on all groups i.e.,
households, manufacturing, services, etc. in the economy, covering both formal
and informal sectors (V. Basil Hans).
1.2. Demonetization across Countries
Demonetization as a monetary policy has been implemented by many

countries from time to time for various reasons and under different
circumstances. Ghana (in 1982), Myanmar (in 1985, 1987), Brazil (in 1990,
1993), Soviet Union (in 1991), Russia (in 1993), Iraq (1993), North Korea (in
2009), Cyprus (in 2013), Greece (in 2015), and Venezuela (in 2016) announced
demonetization suddenly for reasons like controlling excess liquidity,
hyperinflation, fighting black marketing, control organized crime, exchange of
old notes, meet financial and fiscal needs (GoI 2017), Government of India
(2017), Economic Survey.
While countries like Singapore (1967, 1999 and 2014), Australia (1988 and
2015), Euro (1999), Canada (2011), Denmark (2012), Sweden (2013 – 2016),
Zimbabwe (2015), Pakistan (2015), Euro area (2016) introduced demonetization
with prior announcement to overcome monetary system failure, prevent

Introduction
counterfeit money, create common currency, mitigate higher value money,

improve public confidence in currency, replace banknotes, control inflation,
corruption, black money, terrorism and illicit activities using high denomination
currency (GoI 2017), Government of India (2017), Economic Survey.
1.3. Demonetization in India
Central Government announced demonetization in India on November 8, 2016

by withdrawing Rs. 500 and Rs. 1000 notes from circulation. These two
category notes accounted for 86 per cent of total circulating cash in the
economy. Government provided time till December 31, 2017 to deposit old
currencies of Rs. 500 and Rs. 1000, and issued new currencies of Rs. 2000 and
Rs. 500. According to the government demonetization was implemented for
various reasons, which changed from time to time, like combating underground
economy, eradicating counterfeit currency, controlling corruption, controlling
tax evasion, eliminating black money (from money laundering, terrorist
activities), promoting cashless economy, and controlling individuals and
institutions/entities with huge sums of black money obtained from parallel cash
systems.
Initial phase of recent demonetization saw lot of confusions as the cash

dependent economy unexpectedly starved of cash to carry out economic
activities. People had to stand in long and snake like lines outside banks and
ATMs to exchange their old currency to new currency. The problem was
accentuated by non-adjustment of ATM technology to new currency of Rs,
2000 and Rs. 500, so large number of ATMs turned non-functional to new
currency. Further, government had imposed restrictions on withdrawal limit of
cash by individuals from banks and ATMs, where majority of banks and ATMs
faced shortage of cash.

It was believed that implementation of demonetization would result in

improving financial system besides financial behaviour of citizens encouraging
them to use less cash and move towards digital transactions. It was also hoped
that the entire exercise would reduce inflation and control black money
circulating in the economy. However, according to RBI’s Annual Reports share
of high denomination currency did not decline significantly, as it was 86.4 per
cent in March 2016 and 80.2 per cent March 2018.
Demonetization was expected to promote digital transactions, which

paved way for development of alternative methods of payments like Real time
gross settlement (RTGS), National electronic funds transfer (NEFT), mobile
wallets (Paytm, MobiKwik), prepaid cash cards (Itzcash, Ola Money, Flipkart
Wallet) etc. Information presented in Table 1.1 shows payments made through
electronic systems in India between November 2016 and January 2018
published by Reserve Bank of India. Payments made through different
electronic systems was Rs. 94004 billion in November 2016 and increased to
Rs. 131980 billion in January 2018, which indicates rise in use of electronic
payment methods. Among the various methods highest proportion of payment is
made through RTGS followed by NEFT. Electronic payments across all
methods have increased during the above period, as shown by average growth
rate, but payment made through mobile banking has declined from November
2017. This issue needs to be studied further to examine factors for decline in the
wake of promotion of mobile banking among people.

Introduction
Table 1.1: Electronic Payment Systems - Representative Data (Updated as on March 06, 2018)
(Value in Rs. Billion)
Debit
and
Data Credit
PPI Mobile
for the RTGS NEFT CTS* IMPS* NACH* UPI* USSD** Cards Total
# Banking
period at
POS
&
Nov-16 78479.2 8807.8 5419.2 324.8 606.6 0.9 7302.6 352.4 13.2 1244.9 94004.2
Dec-16 84096.5 11537.6 6811.9 431.9 626.8 7.0 103718.4 522.2 21.3 1365.9 104055.3
Jan-17 77486.1 11355.1 6618.4 491.2 541.4 16.6 381760.2 481.2 21.0 1206.7 97011.4
Feb-17 74218.8 10877.9 5993.9 482.2 592.0 19.0 357055.2 391.5 18.7 1080.0 92594.5
Mar-17 123375.8 16294.5 8062.8 564.7 829.4 23.9 337962.4 416.2 21.5 1499.9 149589.1
Apr-17 88512.2 12156.2 6990.6 562.1 905.2 22.0 301650.5 431.4 22.3 1443.8 109602.2
May-17 90170.5 12410.8 6745.9 585.6 692.4 27.7 316723.7 450.8 25.3 1940.7 111109.3
Jun-17 92812.6 12694.2 6409.9 596.5 708.6 30.7 313277.0 468.2 24.1 1584.7 113745.2
Jul-17 87149.3 12011.6 6342.5 604.8 771.7 33.8 302097.8 439.3 25.1 1019.2 107378.4
Aug-17 89163.4 12500.4 6224.3 651.5 752.4 41.3 294239.4 457.1 27.2 1033.0 109817.9
Sep-17 102348.1 14182.1 6271.5 717.6 628.4 52.9 323578.5 478.2 27.6 1121.6 124706.8
Oct-17 92056.1 13851.3 6340.2 750.4 900.5 70.3 299071.8 530.5 32.7 1168.7 114532.2
Nov-17 98410.5 13884.0 6633.9 782.6 724.1 96.4 287309.6 483.3 32.0 848.4 121047.1
Dec-17 100907.8 15779.2 6564.0 871.1 714.0 131.4 299367.3 528.7 35.1 921.5 125531.5
Jan-18 107488.4 15374.1 6792.6 882.1 727.7 155.4 290020.0 521.9 38.3 928.7 131980.8
Avg.
Growth 3.9 5.4 2.3 7.7 2.9 76.0 111.6 3.8 8.9 -0.1 3.9
Rate (%)
Source: Reserve Bank of India Website
Note:
1. Data is provisional.
2. *: Source is NPCI. RTGS – Real time gross settlement
3. **:Figures Negligible, Source is NPCI NEFT – National electronic funds transfer
4. &: Card transactions of four banks. CTS – Cheque truncation system
5. #: PPI issued by 8 issuers for goods and services IMPS – Immediate payment service
Transactions only. NACH – National automated clearing house
6. h: Holiday UPI - Unified Payments Interface
7. Mobile Banking figures are taken from 5 banks. USSD - Unstructured Supplementary Service Data
The total volume & value of electronic payment POS – Point of sale
systems does not include mobile banking. PPI – Prepaid payment instrument
8. NACH figures are for approved transactions only

Impacts of demonetization were observed on all sectors of the economy,

i.e. agriculture, industry and service. In India large number of people earn their
livelihood from agriculture and industrial sector. In terms of employment
industrial sector is contributing next to agriculture by employing large number
of people. These two sectors, unorganized to a large extent, depend on cash for
their transactions. Reduction in cash availability disturbs activities hitherto
carried out through cash. Therefore, effects of demonetization required to be
studied in order to understand its impacts. In this respect examining the impacts
of demonetization on industrial sector becomes essential. Industrial sector
comprises both large scale industries and small scale industries (SSIs) or micro,
small, and medium enterprises (MSMEs). This study is an attempt to examine
impacts of demonetization on SSIs or MSMEs in Karnataka and does not cover
large scale industries, which needs a large scale study.
Demonetization, although was intended to yield favourable results on the

economy the initial impacts were not so favourable as it resulted in different
types of hardships. During demonetization, as reported in various newspapers
and electronic media households struggled to find cash, small businesses were
severely affected, daily wage workers suffered. Trade related activities,
particularly in informal sector, were adversely affected because of cash
shortage. Impact of demonetization created a kind of uncertainty and short term
liquidity was squeezed in the economy. Hence, this study tried to analyse
impacts of demonetization on SSIs in Karnataka.
1.4. Review of Studies on Demonetization

Impacts of demonetization have been reported in newspapers, studies, etc.
on different sectors of economy. A review of these reports and studies would
provide an opportunity to understand demonetization and research gaps to
analyse impacts of demonetization on SSIs.

Introduction
Dash A (2017) argued that initial impacts of demonetization were seen in

social, economic, and health sector, as people faced cash problems during
marriages, at hospitals, etc. because of non-availability of cash. Besides, a cash
limit of Rs. 2,50,000 was allowed for marriages after producing wedding
invitation, but public opined that this amount was insufficient to meet necessary
expenditures of marriage. Further, lack of cash in hand led many people to
forego their medical treatment. People had to stand in long lines at banks and
ATMs waiting for hours to get cash, which all indicate that people found it
difficult to adjust during the initial phase of demonetisation.
Arun Kumar (2017) states that in modern economies money is used for
purposes like transactions, precautionary motives, meet contingencies and also
as store of value. Hence, money is an asset accumulated over time. The study
finds that demonetization reduced cash availability in the economy. This
reduction in cash adversely affected the informal sector, which produces 45 per
cent of output, because of contraction in transactions. Further, working capital
for unorganized sector reduced, particularly impacting on small and cottage
industry, shop keepers, etc.
Singh Pratap and Virender Singh (2016) found that soon after
announcement of demonetization BSE Sensex fell-down by 3.8 per cent which
is more compared to other Asian markets. BSE’s mid-cap and small-cap indices
declined by 6 per cent, and the real picture of impact of demonetization was
seen in BSE Reality index which decreased by 15 per cent.
A study (Hariharan S et al. 2018) conducted in Kanchipuram district of

Tamil Nadu on socio-economic and health impacts of demonetization revealed
that 58.1 per cent of participants used only cash as their payments mode and
only about 6.7 per cent of participants reported to have used credit card, debit
card and online transactions, which indicates that majority of people use cash as

payment mode. Large number of participants (over 60 per cent of sample) had
reported to be satisfied with demonetization move as it would help government
in curbing black money and fund for terrorism related activities. Further,
majority of respondents opined that the government had not made adequate
arrangements for implementation of demonetization and hence large number of
people under went stress during demonetization process.
Vij Dimpal (2018) analyzes impacts of demonetisation on Indian

economy and finds both positive and negative effects. The study states that
people converted their black income to white by depositing in banks, as 99 per
cent of Rs. 500 and Rs. 1000 i.e. Rs. 15.28 crore of Rs. 15.44 crore has been
deposited in banks. Further, 2.24 lakh dubious companies were identified and
their bank accounts are frozen. It is observed that Rs. 15497 crores of
unaccounted money had been voluntarily declared which is 38 per cent higher
than previous year which indicates positive effect of demonetization. However,
on terror funding the study states that in the first six months of 2017 terrorist
supported activities like stone pelting in Jammu and Kashmir increased from 71
to 324; controlling fake currency another objective of demonetization was also
not achieved as many cases of counterfeit currency had come to light.
Demonetization has helped in increasing tax compliance as direct tax collection
rose by 15.2 per cent between April and October 2017-18. The study finds
that demonetization has helped in changing saving habits of people as gross
financial savings increased from 10.9 per cent of gross national disposable
income in financial year 2016 to 11.8 per cent in the year 2017. People instead
of holding cash invested their money in mutual funds, which saw an increase of
155 per cent. However, the study observes that GDP growth has declined from
8 per cent in 2015-16 to 7.1 per cent 2016-17. Agriculture sector that depends
largely on cash based transactions was hit by demonetization and similarly
industrial sector also witnessed decline from 8.8 per cent in 2015-16 to 5.6 per

Introduction
cent in 2016-17 as noticed by the study. Demonetization hit hard the real estate
sector which saw a negative growth from 4.5 per cent in 2015-16 to 1.7 per cent
in 2016-17. It is to be noted that demonetization aimed at increasing digital
transactions, but this move has resulted in more number of cyber crimes in the
country. As reported by the study cyber crime increased by three folds during
this time.
Arun Kumar (2017) analysing data from RBI and answer given to
questions in Rajya Sabha found that by January 13, 2017 98.8 per cent of old
notes had come back, and further by end of April 2017 remonetisation was done
to the extent of 79.66 per cent of currency in circulation on 8 November 2016.
The study states that currency with public did not decline drastically as at the
peak of demonetization currency shortage was at 47.03 per cent.
Litvack Leon and Samuel Vigne (2017) states demonetization was aimed
at reducing shadow economy and tax evasion, but there are no studies which
have quantitatively verified this. The study observes that demonetization
severely affected casual labourers particularly in informal sectors, which
constitutes 92 per cent of workforce, by reducing their earnings. The study
reports that the drive towards cash less or digital economy might be enhanced
by demonetization and this would increase financial inclusion in India where 47
per cent of population had no financial access in 2014.
A study on effects demonetization conducted in National Capital Region

during January – February 2017 by Beg Sana and Nandita Joshi (2017) revealed
that 50 per cent of respondents opined note ban was not a bad move, but
majority said that demonetization is not the only way for controlling black
money because people hold black money in terms of assets. Over 80 per cent of
respondents faced problems of exchanging Rs. 2000 notes. Majority of people
reported that demonetization was not a planned implementation, had several

loopholes. It adversely affected routine life of people (65 per cent of

respondents). The study observed negative impact of demonetization on real
estate sector (as reported by 55 per cent of respondents) and tourism industry
(90 per cent of respondents).
Ritika Mankar and Sumit Shekhar (2017) studied impacts of

demonetization between 22 November and 2 December, 2016 covering a
sample of 88 small, medium enterprises (SMEs) across India. The study found
that SME sector is under pressure after demonetization. Further, it was observed
that SMEs in India depend on cash as more than 50 per cent of transactions are
cash based; sales would decline (according to 50 per cent SMEs); competition
from formal sector would increase according to 59 per cent of SMEs; and non-
performing loans in SME segment would increase for money lenders. SMEs
opined that they would not be able to collect more than 50 per cent of remaining
dues from their customers. This study further found that textile industry in
Panipat of Haryana saw 40 to 80 per cent decline in its domestic sales, which
resulted in laying off workers. In Tiruppur of Tamil Nadu also seen decline in
demand and hence functioning of units was reduced to 3 days in a week, which
was seven days before demonetization.
Pawan Kumar (2018) argues that demonetization has negative impact on

employment opportunities in India. Economic growth and employment growth
are directly related and hence the projected decline in GDP, ranging from 0.5 to
2 per cent growth rate due to demonetization would decline employment also.
According to the author if demonetization led to closure of a factory it leads to
unemployment of 41 workers.
Gabriel Chodorow-Reich, Gita Gopinath, Prachi Mishra and Abhinav

Narayanan (2018) study the importance of cash in transaction by analysing
impacts of demonetization in India. The study assumes that demonetization

Introduction
amounts to a forced conversion of cash into less liquid bank deposits, which in
the presence of downward wage rigidity generate a decline in output,
employment and borrowing by firms. Households also switch to non-cash forms
of payment to attenuate the impact of cash shortage. The study observes that all
districts experienced reduction in the receiving new currencies, where the
median district received new notes equal to 31 per cent of demonetized notes.
After demonetization payments using e-wallet and POS have increased, growth
in alternative method of payments. Further, the study finds that in areas
experiencing severe demonetization effects bank deposits have increased while
credit has been contracted. The authors found that areas experiencing more
severe demonetization had sharper declines in ATM withdrawals, reduced
economic activity, and faster adoption to alternative payment technologies. This
study observed the following results “(i) demonetization caused cash shortages,
as evidenced by a sharper decline in ATM withdrawals in areas with larger
shocks; (ii) economic activity, as measured by employment rates and
nightlights, fell in these areas relative to areas which experienced smaller
shocks; (iii) these areas adopted alternative forms of payment; and (iv) deposits
increased more and credit fell in these areas”.
Literature reviewed above revealed that demonetization announced

suddenly by the government created cash shortage and hence people faced
problems to meet their necessary expenditures like health needs, family events
like marriages, etc. For instance, in Tamil Nadu where more than 50 per cent of
respondents use cash payments faced problems during demonetization process.
Further, some studies found that impact of demonetization was adverse on
informal sector, particularly casual labourers affected severely. Some studies
have shown that demonetization was not successful in achieving its objectives
like controlling unaccounted money, counterfeit money, but along with increase
in digital transactions finance related cyber-crime rate also has increased.

Demonetization created negative impacts on real estate and tourism sectors as

evidenced by few studies. Impact of demonetization was observed in all spheres
of life, in this regard industrial sector is also affected as revealed in some
studies. Among the various studies available hardly any study has been
conducted to examine impacts of demonetization. Majority of the available
studies are general in nature while explaining impacts, while few have
mentioned any information on data and sample selection. Studies related to
small scale industries (SSIs) or micro, small and medium enterprises (MSMEs)
are not available except one reviewed above. Even this study also covers limited
sample of 88 units spread across the country. It is to be observed that no study
has been carried out to examine the impacts in a detailed manner. In this respect
the present study attempted to fill the gap by carrying out a detailed study on
impacts of demonetization on small scale industries or MSMEs in Karnataka.
1.5. Need for the Study
Small scale industries sector or MSME comprises of micro and small

scale industries, which includes automobiles, electrical and electronics,
chemicals, food and intoxicants, leather, paper and printing, rubber and plastic,
textiles, wood and others enterprises. According to Directorate of Industries and
Commerce Karnataka has 382269 small scale industrial units up to 2014-15 and
provided employment to 2277122 people. These small scale industries depend
upon cash for their regular transactions, as it provides high and quick liquidity,
besides convenience.
In this context, it is imperative to analyse the impact of demonetization

on small scale industrial sector whose survival is largely dependent on everyday
transactions in local and surrounding markets. This sector of the economy deals
with local people where cash transactions are very large in size both in rural and
urban areas. Their dealings in short period purchases of raw materials and in

Introduction
retail sale are in the form of cash. It is likely that demonetization policy has its
first hit on these small scale producers. Hence the present study is taken up to
examine impacts of demonetization on small scale industries in Karnataka.
1.6. Evaluation Framework
The present study attempted to assess the impacts of demonetization on

small scale industries in Karnataka. The state has 3.82 lakh small scale
industries employing about 22.77 lakh people. The study has been conducted
now to understand the impacts of demonetization on small scale industries in
Karnataka. It is known that demonetization was implemented in India on
November 9, 2016. Therefore, the impacts of demonetization have been
assessed in three periods i.e., before, during and after demonetization, which
can give more insights on effects of demonetization.
1.7. Scope and reference period of evaluation
Scope of this study limited to small scale enterprises selected from the
sample region. Analysis in this study covers the impact on production, sales and
revenue of SSIs. The reference time period was April 2016 to May 2017
covering three periods i.e., before, during and after demonetization.
1.8. Stakeholders and audience
• Stakeholders of the study are SSI units.

• Audience of the study are Karnataka Small Scale Industries Development
Corporation (KSSIDC), Government of Karnataka.
• This study will evaluate impacts of demonetization on SSIs.

1.9. Objectives of the study
In the backdrop of implementation of demonetization and issues discussed

above the present study attempted to -
1. understand need for and the context of demonetization in India
2. study the volume or revenue of small scale industries in the study area
3. examine impact of demonetization on production and sale of SSI producers
4. To examine the impact on employment of workers in SSIs after
demonetization
5. To know gains and losses to the enterprises due to demonetization
1.10. Evaluation questions and sub questions
1. What is the first reaction of small scale entrepreneurs to the sudden

decision taken by the Government?
2. What were the difficulties faced by them in the initial stage?
3. What are the coping strategies adopted by them to meet the
emergencies in initial stages?
4. How things have moved for them during different phases of the
demonetization policy?
5. What was the specific impact on transactions during the period 9th
November to 31st December?
Sub questions are given in schedule (enclosed).
1.11. Source of data
Data on number of SSIs, etc. have been collected from secondary sources,
while primary data required for the study were collected from SSI Units in the
sample area.

Introduction
1.12. Indicators
1. Level of revenue (month/year)

2. Level of income – (before and after)
3. Level of borrowings (before and after)
4. Number of employees (before and after)
1.13. Evaluation methods and techniques
This study used before and after approach to assess the impacts of
demonetization on SSIs. As the nature of the study was quick analysis based on
small sample size, the methodology is designed to suit the requirements of the
study. Hence, simple statistical tools like average, percentage were used to
analyse data.
1.14. Data and information sources
The study is mainly based on primary data but secondary data were also
used according to the needs of study. Sources of secondary data are government
reports – Directorate of Industries and Commerce, Directorate of Economics
and Statistics, Government of Karnataka
Source of primary data was SSIs and data were collected by using pre
designed and pre tested schedule addressed to the sample respondents. Data
were collected from entrepreneurs of SSIs in the study area, through field
assistants. Entrepreneurs provided information by recalling their experience
before, during and after demonetization. The study adopted recalling method of
data collection, in spite of its limitations, as it helped in gathering information in
the given time. Further, focussed group discussion (FGD) was also conducted

with SSI unit owners to elicit their information on impacts of demonetization on

production, employment, financial aspects, etc.
1.15. Sample and sampling design

Sampling structure was designed to get a disaggregated assessment of the
impact of the policy on small producers in rural and urban areas incorporating
issues related to development. Data base used for sample selection was from the
Directorate of Industries and Commerce, published by Directorate of
Economics and Statistics. Number of SSIs is highest in Bangalore Urban with
91314 units and hence this district is selected for the study, besides Bangalore
Urban district also represents urban area. In order to represent rural and
backward regions of the state one district, Kalaburgi, from Hyderabad
Karnataka region has been randomly selected. Bangalore North Taluk from
Bangalore Urban district and Chittapur and Gulbarga taluks from Kalaburgi
districts have been chosen to identify SSIs and field survey was conducted in
these two taluks. The Sample design of the study is given in Table 1.2.
Table 1.2: Sample Design of the study
Criteria District Taluks Number of SSIs Sample size
Urban Bangalore Bangalore North 2199 215
Chittapura 116
Rural Kalaburgi 20
Gulbarga 78
Total 2393 235
Note: Sample size considered was 10 per cent of total number of SSIs i.e. 240. However, data
from 5 SSI units were insufficient hence the study considered 235 SSI units as sample size.
1.16. Data collection tools

Primary data were collected by using schedules (Annex 3) canvassed through
field investigators in the study area of Bangalore Urban and Kalaburgi districts.

Introduction
1.17. Method of data analysis

Data collected through schedules will be analysed by using statistical tools like
per cent and averages. The data were processed and qualitative data were coded
appropriately.
1.18. Limitations
Present study attempted to analyse impacts of demonetization on small scale

industries in Karnataka. This is a short term study focussing mainly on eliciting
experience and opinion of SSI owners. The study did not consider large scale
industries. Scope of the study is limited to analyse experience of SSIs on aspects
like revenue, production, employment, finance, banks etc. The study attempted
to collect data on various aspects, but the respondents were not inclined to share
it. In this background, the study analysed impacts using available data from
respondents. Further, this study covers only two districts, namely Bangalore
Urban and Kalaburgi. Hence, there is a limited scope for generalizing the
results.


Introduction
Chapter II
Small Scale Industries in India and Karnataka
Industries are major contributors of economic development both in terms

of production of goods and generation of employment opportunities. Industrial
sector constitutes large, medium and small scale industries. Contribution of
small scale industries (SSIs) is also significant, as during 2015-16, they have
accounted for 28.77 per cent of GDP (CSO, quoted in Annual Report 2017-18,
Ministry of Micro, Small and Medium Enterprises, Government of India, 2018).
This chapter presents details about small scale industries in India and
Karnataka.
It is to be noted that since 2006 SSIs are being referred to as micro, small
and medium enterprises (MSMEs). Government of India has classified MSMEs
according to the Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006. This Act classifies MSMEs in to two broad categories as
manufacturing sector and service sector based on investment on plant,
machinery and equipment (as shown below).
Classification of MSME’s in India
Manufacturing Sector
Enterprise Category Investment in plant & machinery
Micro Enterprises Does not exceed twenty five lakh rupees
Small Enterprises More than twenty five lakh rupees but does not
exceed five crore rupees
Medium Enterprises More than five crore rupees but does not exceed ten
crore rupees

Service Sector
Enterprise Category Investment in equipment
Micro Enterprises Does not exceed ten lakh rupees
Small Enterprises More than ten lakh rupees but does not exceed two
crore rupee
Medium Enterprises More than two crore rupees but does not exceed five
crore rupees
Source: Government of India, 2018, Annual Report 2017-18, Ministry of Micro, Small and Medium
Enterprises, Government of India, 2018.
2.1. Number of MSMEs in India

According to the 73rd Round of National Sample Survey there were
633.88 lakh MSME units in India during 2015-16, out of which manufacturing
units are 196.65 lakh, trade related are 230.35 lakh units, other services are
206.85 lakh units and electricity are 0.03 lakh units. Among these 51 per cent of
MSMEs are in rural area while the remaining are located in urban areas.
Further, distribution of MSMEs across micro, small and medium shows that
630.52 lakh are micro, 3.31 lakh are small and 0.05 lakh are medium units. The
above illustration reveals that micro units, which have invested less than Rs. 25
lakhs in manufacturing and less than Rs. 10 lakhs in service sector constitute a
major share in total MSMEs in India.
2.2. Industrial Scenario in Karnataka

Karnataka is one of the leading states in Indian industrial sector,
particularly in high-technology based industries in electrical, electronics,
information and communication technology, biotechnology and nanotechnology
areas, which indicates existence of modern high-tech capital intensive and
knowledge intensive industries in Karnataka. The state is considered as most
desired place for starting industries in the country, which has resulted in

Introduction
establishment of both large scale and small scale industries in the state. It is to
be noted industrial units have been established by both public sector and private
sector in the state.
MSMEs constitute a significant and increasing place in industrial

scenario of Karnataka, as the state has been promoting MSMEs to achieve
objectives of employment generation and production. Concerted efforts for
development of small scale industries in the state began in 1961 with the
Directorate of Industries and Commerce starting to register small scale
industries. These efforts have developed MSMEs sector as one of the important
sectors in terms of employment creation and increased share of industrial
production. Information on number of SSIs in the state are presented in Table
2.1, which shows that during 2016-17 the state had 5.78 lakh SSIs providing
employment opportunity to 37.52 lakh people. Across the districts Bangalore
urban district has more number of SSIs followed by Belagavi, while Yadagiri
district has less number of SSIs compared to other districts.
Table 2.1: Number of Small Scale Industrial Units in Karnataka (up to 2016-17)
Sl. No. Districts Number Employment
1 Bangalore 117717 1242662
2 Belagavi 50341 235562
3 Dharwada 36346 197669
4 Mysore 35129 192936
5 Dakshina Kannada 32403 210479
6 Tumkur 28933 159785
7 Bangalore (R) 26219 212603
8 Ballari 24749 137685
9 Shivamogga 23005 106980
10 Kalaburgi 20939 89286
11 Kolar 17410 116687

12 Vijayapura 16292 78556

13 Hasana 15681 70235
14 Chitradurga 15167 74708
15 Uttara Kannada 14217 68474
16 Raichur 13631 76079
17 Mandya 12464 59559
18 Chikkamagaluru 11528 45472
19 Bidar 9275 56646
20 Davanagere 8021 33552
21 Bagalakote 7809 38942
22 Udupi 7508 64031
23 Haveri 6431 24469
24 Koppala 5587 28608
25 Gadaga 5108 23534
26 Kodagu 4619 29054
27 Ramanagara 4370 39203
28 Chamarajanagara 3291 17911
29 Chikkaballapura 2472 15841
30 Yadagiri 1455 5793
Karnataka 578117 3752935
Source: Directorate of Industries and Commerce, Government of Karnataka
This chapter provided an overview of small scale industries in India and

Karnataka. There are over 5.78 lakh SSI units in the state providing job to over
37.52 lakh persons in the state.

Characteristics of Small Scale Industries in Study Area and Views on Demonetization
Chapter III
Characteristics of Small Scale Industries in Study Area and
Views on Demonetization
This chapter provides characteristics of small scale industries in the study

area in terms of number of factories, employment, number of SSIs, etc. as
background for understanding nature of SSIs. Further, it also discusses how
SSIs viewed demonetization, type of problems faced, etc. Small scale industries
were selected from Bangalore Urban and Kalaburgi districts as explained
earlier, where the first one represents urban area and the later represents rural
area for an in-depth study.
Population composition (Census 2011) across rural and urban areas of

these two districts shows that in Bangalore Urban district 9.06 per cent of
people live in rural area while 90.94 per cent in urban area. In contrast to
Bangalore Urban district, Kalaburgi has 67.44 per cent of people in rural area
and 32.56 per cent in urban area. Rural – urban composition of population in
these two districts differ when compared to Karnataka as a whole as at the state
level over 61 per cent of population are in rural areas and 39 per cent is in urban
areas. This indicates that Bangalore Urban and Kalaburgi districts represent
urban and rural areas of the state in this study.
Let us look at the industrial scenario in terms of number of factories,

industrial estates, number of SSIs, etc. in selected districts.
3.1. Number of Factories and Employment in Study Districts

Information presented in Table 3.1 shows that in Karnataka 13959
factories were there employing over 15.16 lakh people in 2015. Number of
factories is significantly high in Bangalore Urban district as over 43 per cent of
factories in Karnataka are located in Bangalore, providing employment

opportunities to nearly 46 per cent total employment in the state, while the same
is respectively around one per cent in Kalaburgi district. This indicates that
factories have been concentrated heavily in urban area compared to rural area.
Factories include readymade garments, textiles, chemical and engineering as
reported by the Department of Factories and boilers, but the source of data does
not show whether all these factories are SSIs or not. However, the available
information presents a view about industrial scenario in Karnataka.
Table 3.1: Number of Factories and Employees, as on March, 2015

Types Bangalore Urban Kalaburgi Karnataka
Number Employees Number Employees Number Employees
Readymade
garments 728 286847 - - 859 379492
Textiles 112 6073 1 50 191 22302
Chemical 195 18300 6 1340 510 51923
Engineering 1118 104367 23 2860 2129 208700
Others 3906 281917 95 14972 10270 854263
Total 6059 697504 125 19222 13959 1516680
Source: Department of Factories and Boilers, published by Government of Karnataka (2015),
Karnataka At a Glance - 2014-15, Directorate of Economics and Statistics, Bengaluru
Industrial development depends on availability of area specified for the

purpose, information on industrial estates, sheds and plots is presented in Table
3.2. Karnataka government has developed 176 industrial estates, 6211 sheds as
on 2015. Distribution of these infrastructures across districts shows Bangalore
district has more number of industrial estates, and sheds compared to Kalaburgi.

Table 3.2: Number of Industrial Estates, Sheds and Plots (as on March, 2015)
Districts Estates Sheds Plots
Bangalore 16 2140 616
Kalaburgi 10 238 574
Karnataka 176 6211 8269
Source: Karnataka Small Scale Industries Development Corporation, published by
Government of Karnataka (2015), Karnataka At a Glance - 2014-15, Directorate of
Economics and Statistics, Bengaluru
Number of small scale units in the state is presented in Table 3.3 which
shows that 5.78 lakh units have been established employing 37.52 lakh persons
(Government of Karnataka – Directorate of Industries and Commerce).
Bangalore Urban district has more number of SSIs (20.36 per cent), as shown in
Fig. 3.1, while it is 3.62 per cent in Kalaburgi. Further, number of people
employed in SSIs also more in Bangalore compared to Kalaburgi. Bangalore
has attracted more number of SSIs which might be due to available
infrastructure, manpower and other facilities like accessibility and conducive
environment. It is necessary to examine exact reasons for promoting industries
in other districts also based on raw materials available.
Table 3.3: Number of Small Scale Industrial Units in Karnataka (up to 2016-17)
Districts Number Employment
Bangalore 117717 1242662
Kalaburgi 20939 89286
Karnataka 578117 3752935
Source: Directorate of Industries and Commerce,

Fig. 3.1. Number of SSI units and employment in Karnataka (

in per cent)
35.00
33.11
30.00
25.00
20.36
20.00
15.00
10.00
5.00 3.62
2.38
0.00
Number Employment
Bangalore Kalaburgi
Small scale industries registered in district industrial centre, presented in

Table 3.4, indicates that during March, 2015 over 1.69 lakh units were
registered in the state in which over 8.47 lakh people were employed. Number
of units registered in Bangalore Urban district is 4710 and in Kalaburgi district
607 units.

Table 3.4: Small Scale units registered in District Industrial Centre as on March, 2015
Districts
Bangalore Urban Kalaburgi Karnataka
Total Total Total
Categories of SSIs Number Workers Number Workers Number Workers
Automobile 999 6655 8 40 2677 19287
Electricals & 680 6675 4 27 5602 30842
Electronics
Chemicals - - 5 32 4375 32433
Food and Intoxicants 570 3525 64 401 23164 140629
Leather 580 3805 25 115 5777 22337
Paper and Printing 520 3310 1 6 3771 19966
Rubber and Plastic 580 3650 3 18 2811 19493
Textiles - - 4 24 26001 90392
Wood 781 4780 45 213 22497 65085
Others - - 83 431 43414 238914

Other service - - 365 1590 29083 167653
activities
Total 4710 32400 607 2897 169172 847031
Source: Directorate of Industries and Commerce, published by Government of Karnataka (2015),
Karnataka At a Glance - 2014-15, Directorate of Economics and Statistics, Bengaluru
Note: Data pertains to categories of SSIs presented in the table
3.2. Profile of Small Scale Industries selected for the Study
As outlined above Bangalore Urban and Kalaburgi districts have been

selected for the study. In Bangalore Urban district, Bangalore North Taluk and
in Kalaburgi district Kalaburgi and Chittapur taluks were selected for data
collection. In Bangalore North taluk 215 SSIs units and in Kalaburgi and
Chittapur taluks 20 SSI units, altogether 235 SSI units, (Table 3.5) were
considered to canvass the structured schedule.

Table 3.5: Number of SSI units

Number of SSIs Percent
Bangalore Urban 215 91.5
Kalaburgi 20 8.5
Total 235 100.0
Source: Survey Data
Information on types of SSIs, according National Industrial

Classification, covered in the study are presented in Table 3.6, which illustrates
that out of 235 units, SSIs related to manufacture of machinery and equipment -
non electrical components are more (103 units), followed by manufacture of
fabricated metal products - except machinery and equipment with 49 units.
Across the districts, in Bangalore district the above two categories of SSIs are
large in number compared to other types, while in Kalaburgi district SSIs of
other mining and quarrying are highest at 8 units out of 20 SSI units.
Table 3.6: Distribution of SSIs in the study area according National Industrial
Classification (Numbers)
NIC Classification Bangalore Kalaburgi Total
1. Other mining and quarrying - 8 8
2. Manufacture of food products and beverages 3 2 5
3. Manufacture of wearing apparel; dressing and
7 1 8
dyeing of fur
4. Manufacture of paper and paper products 3 3
5. Publishing, printing and reproduction of recorded
2 2 4
media
6. Manufacture of chemicals and chemical products 9 9
7. Manufacture of rubber and plastic products 24 1 25
8. Manufacture of fabricated metal products, except
46 3 49
machinery and equipment

9. Manufacture of machinery and equipment n.e.c 101 2 103

10. Manufacture of electrical machinery and apparatus
16 16
n.e.c.
11. Manufacture of furniture; manufacturing n.e.c 4 1 5
Total 215 20 235
Source: Survey Data
3.2.1. Establishment Period of Small Scale Industries
Year of establishment of SSIs in the study area, Table 3.7, reveals that
large number of SSI units were started, nearly 62 per cent (Fig. 3.2), between
2001 and 2010 taking both districts together, followed by 17 per cent during
2011 – 16. Establishment of large number of SSIs during this period might be
due to policy changes in industrial sector of the state, which promoted MSMEs
as engines of growth and job creation. Across the districts also during 2001 to
2010 around 61 per cent of SSIs were started. However, in Kalaburgi 30 per
cent of selected SSIs were established during 2011 to 16.
Table 3.7: Year of Establishment of SSIs

Year Bangalore Urban Kalaburgi Total
Before 1990 19 1 20
(8.8) (5.0) (8.5)
1991 - 2000 29 1 30
(13.5) (5.0) (12.8)
2001 - 2010 133 12 145
(61.9) (60.0) (61.7)
2011 – 2016 34 6 40
(15.8) (30.0) (17.0)
Total 215 20 235
(100.0) (100.0) (100.0)
Source: Survey Data Note: Figures in brackets are percent to total.

3.2.2. Spread of Market Area of SSIs

Information presented Table 3.8 illustrates marketing area covered by
SSIs, which shows over 84 per cent of SSIs in the study districts have their
marketing area in few districts around their location. This indicates that to a
greater extent SSIs cater to the needs of local markets. Number of SSIs
covering few districts is more in Bangalore district (nearly 88 per cent), while
50 per cent of SSIs in Kalaburgi reported to have their marketing area in entire
Karnataka. SSIs are meeting the demand of nearby markets shows their
significance in that area. This point might be considered for spread and
promotion of SSIs in other districts also to meet local needs.
Table 3.8: Extent of Marketing Area SSIs in study area

Marketing Area Bangalore Urban Kalaburgi Total
10 10 20
Entire Karnataka
(4.7) (50.0) (8.5)
189 9 198
Few Districts
(87.9) (45.0) (84.3)
16 1 17
Karnataka and Outside
(7.4) (5.0) (7.2)
215 20 235
Total
(100.0) (100.0) (100.0)

3.2.3. Investment of Small Scale Industries in the Study Area
Small scale units covered in this study are manufacturing units in both
Bangalore Urban and Kalaburgi districts. This study made an attempt to
examine the establishment cost of SSIs (Table 3.9), which showed that these
units have invested an average amount of Rs. 1.51 crore taking all SSI units
together (This investment is at the beginning of SSI units). Across the districts
SSI units in Bangalore district have spent more to establish the unit (Rs. 1.58
Crores) compared to that in Kalaburgi (Rs. 0.75 Crores), which shows
establishing SSI units in Bangalore is costlier than that in Kalaburgi. Major
reason for high investment in Bangalore is mainly due to high land value and
construction or high amount of rent for building to carry out SSI activities. It is
to be noted that SSI units in both districts fall under category of small
enterprises, with an investment between Rs. 25 lakh and Rs. 5 Crore, according
MSME classification. Average investment by SSI units ranges from Rs. 75.49
lakh in Kalaburgi to Rs. 1.58 Crores in Bangalore urban district.
Table 3.9: Investment of Small Scale industries in the study area (Rs.)
Districts Average Amount of Investment per unit
Bangalore Urban 158,17,533
Kalaburgi 75,49,400
Total 151,13,863
Source: Survey Data
Note: Average investment at the beginning of the SSI units
3.2.4. Revenue Pattern of Small Scale Industries
Revenue is an important indicator of performance of any economic,

particularly manufacturing activity. Every producer attempts to maximise his
revenue by usually increasing sale of his products. The present study made an
attempt to understand the pattern of revenue generated by SSIs in the study area

during 2010 -11 to 2016-17. Average revenue of SSIs during the above period is
presented in Table 3.10. The average revenue of SSIs, taking both districts
together, range from Rs, 4.29 crore in 2015-16 to Rs. 5.16 crore in 2011-12. A
point to be observed is that the average revenue of SSIs in Bangalore urban
district is higher than that in Kalaburgi district. This might be due to
concentration of more number technology based SSI units in Bangalore as
observed above. Taking all SSIs together the average revenue was Rs. 5.16
crore during 2011-12 and it was Rs. 4.41 crore in 2016-17, showing a decline
over the years. It is to be noticed that the average revenue has been continuously
declining over the years in both districts also (Fig. 3.3). According to owners of
SSIs, factors like decreased demand, non-availability of financial support during
necessary times like getting work order from customers, increased competition,
etc. reduced revenue.
Table 3.10: Average revenue of SSIs between 2011 – 12 and 2016 – 17 (Rs.)
Districts
Years
Bangalore Urban Kalaburgi Total
2010-11 4,87,98,265 94,88,889 4,53,96,492
2011-12 5,56,53,080 94,19,444 5,16,90,197
2012-13 4,99,99,330 97,38,889 4,66,28,688
2013-14 5,10,52,782 97,52,778 4,76,58,261
2014-15 4,76,84,827 93,59,722 4,46,05,131
2015-16 4,60,85,910 83,89,474 4,29,98,702
2016-17 4,76,29,007 63,49,000 4,41,15,814
Source: Survey Data

Figure 3.3. Pattern in Average Revenue of SSIs (Rs.)

6,00,00,000
5,00,00,000
4,00,00,000
3,00,00,000
2,00,00,000
1,00,00,000
0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
3.3. Demonetization: Problems and Coping by Small Scale Industries

As seen in review of literature demonetization impacted adversely on different
aspects like meeting health and marriages related expenditures, reduction in
cash availability to industries, fall in realty market, etc. Let us examine the
impacts of demonetization in study area, which is discussed in the form of
problems faced by entrepreneurs, method of overcoming the difficulties etc.
3.3.1. Source of information on demonetization
Announcement of implementing demonetization on November 8, 2016

was unexpected as revealed by SSI entrepreneurs. Large number of
entrepreneurs, i.e., over 93 per cent of total respondents (Table 3.11) said that
they came to know about demonetization through television. This indicates that
television is an important media of communication. Among the districts
television is the main source of information in both Bangalore and Kalaburgi,
while in Kalaburgi 25 per cent of respondents got information from both
television and newspaper.

Table 3.11: Source of information on Demonetization

Source Bangalore Urban Kalaburgi Total
TV 206 13 219
Per cent (95.81) (65.00) (93.19)
News paper 2 2 4
Per cent (0.93) (10.00) (1.70
TV and News paper 7 5 12
Per cent (3.26) (25.00) (5.11)
Total 215 20 235
Per cent (100.00) (100.00) (100.00)
Source: Survey Data
Note: Figures in brackets are percent to total.
3.3.2. Nature of Difficulties during Demonetization
Implementation of demonetization reduced cash circulation in the

economy as observed in previous sections. Entrepreneurs of SSIs reported that
withdrawal of specified currencies of Rs. 500 and Rs. 1000 from circulation, all
of a sudden created problem to carry out their daily business. Reduction in cash
adversely affected activities of small scale units like cash shortage for paying
salary, purchasing raw materials, etc. as shown in Table 3.12. It is to be noticed
that 26 per cent of SSIs covered in the study faced difficulties to pay salary for
their workers (Fig. 3.4), which is more in Kalaburgi district, which indicates
that during demonetization rural areas faced more difficulties than urban areas
like Bangalore Urban district. Although the per cent of SSIs reported no
difficulties is high, at 63 per cent, more than 25 per cent of SSIs have faced
difficulties, which need to be taken in to account to understand the impacts of
demonetization.

Table 3.12: Difficulties faced during demonetization

Difficulty Bangalore Urban Kalaburgi Total
50 11 61
Cash shortage for salary
(21.28) (4.7) (25.98)
13 1 14
Cash shortage for raw materials
(5.53) (0.42) (5.95)
4 0 4
Transactions reduced
(1.70) (0.0) (1.70)
7 1 8
Long waiting - Banks and ATMs
(2.98) (0.42) (3.40)
141 7 148
No difficulties - Normal
(60.00) (2.97) (62.97)
215 20 235
Total
(91.49) (8.51) (100)
Fig. 3.4. Difficulties during demonetization (per cent)

70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
Cash shortage Cash shortage Transactions Long waiting - No difficulties -
for salary for raw reduced Banks and Normal
materials ATMs

3.3.3. Managing cash inadequacy during demonetization

Let us examine how entrepreneurs handled the situation of shortage of
cash during the initial phase of demonetization. Taking together both the
districts nearly 14 per cent of entrepreneurs (Table 3.13) used cash in hand to
make payments, while the same per cent of SSIs borrowed loan to meet cash
inadequacy. The proportion of entrepreneurs used cash is high in Bangalore
district and the proportion of taking loan is more in Kalaburgi district (65 per
cent). This indicates that in urban area like Bangalore entrepreneurs hold more
cash than entrepreneurs in rural areas like Kalaburgi, for meeting transactions.
This might be the reason for borrowing by more number of owners of SSIs in
Kalaburgi district. Number of SSI units used electronic transfers like NEFT,
RTGs etc. to overcome cash inadequacy is low during the initial phase of
demonetization. However, it should be noted that in Bangalore Urban district
large number of SSI units did not face cash inadequacy problem, which may be
because of using electronic mode of transaction.
Table 3.13: Managing cash inadequacy

Method of managing cash
inadequacy
Used cash in hand 31 1 32
(14.4) (5.0) (13.6)
Paid through cheques/ 5 4 9
NEFT/ RTGS/ Banks (2.3) (20.0) (3.8)
Borrowed loan 21 13 34
(9.8) (65.0) (14.5)
Payments postponed 7 0 7
(3.3) (0.0) (3.0)
No inadequacy 151 2 153
(70.2) (10.0) (65.1)
Total 215 20 235
(100.0) (100.0) (100.0)

3.3.4. Relation between entrepreneurs and banks during demonetization
In the initial phase of demonetization banks were asked to exchange old

currency of Rs. 500 and Rs. 1000 in the hands of people to new currency, where
long queues were seen at many places in front of banks and occurrence of
untoward incidents were also reported by media, which was observed earlier. In
this regard, this study tried to examine the interaction between banks and
entrepreneurs in the study area, where over 22 per cent of the respondents
(Table 3.14) from both districts faced problems in their transactions at banks
while exchanging their old notes or getting new currencies. Per cent of SSIs
faced problems is more in Kalaburgi, at 40 per cent compared to Bangalore at
21 per cent. This might be because of inadequate supply of new currencies to
rural and interior areas. All this reveals that entrepreneurs, at least to some
extent, faced problems while interacting with banks during demonetization
phase and this is more in rural areas compared to urban areas.
Table 3.14: Interaction with banks during initial days of demonetization

Nature of interaction Bangalore Urban Kalaburgi Total
45 8 53
Faced problems
(20.93) (40) (22.55)
170 12 182
Normal
(79.07) (60) (77.45)
215 20 235
Total
(100) (100) (100)
Source: Survey Data
Note: Figures in brackets are per cent to total.
Further, this study tried to elicit information on the average time spent by
respondents at ATM or Banks to get new money or to exchange old notes. It
was observed that on an average people spent 3 hours at ATM to withdraw

money whenever the money was loaded to ATM machine. Respondents

reported that money in ATM was getting over soon and sometimes not
available. This condition was there for almost a week after announcing
demonetization. Similarly, respondents opined that even at banks also they
spent on an average 3 hours to deposit old currency and to obtain new currency.
Large crowds were seen at banks for exchanging money where aged people
were also standing in the line as reported by respondents. Further, they said that
even the amount given by banks was less; therefore it was difficult to manage
their day to day transactions. All these points reveal the difficulties faced by
people at banks and ATM during demonetization.
This chapter presented industrial scenario in Karnataka and study

districts, which showed Karnataka has over 4.8 lakh registered MSMEs
providing job to over 28 lakh people. The study considered Bangalore Urban
and Kalaburgi districts for primary data collection from SSIs using structured
schedule, covering 235 sample SSIs. It was observed that SSIs felt
demonetization was a sudden move, which created problems in their daily
transactions. Owners of SSIs resorted for different methods to overcome the
problem of cash shortage. Some of them also faced problems while transacting
in banks.

Impact Demonetization on Production, Revenue and Employment of Small Scale Industries
Chapter IV
Impact of Demonetization on Production, Revenue and
Employment of Small Scale Industries
It is known that during demonetization process money supply would

shrink, hence cash availability decreases thereby causing disturbances in
economic activities like production, consumption etc. at least in the initial
phase. This was also seen as evidenced by few studies reviewed earlier. This
study attempted to examine the impact of demonetization on production and
sales of SSIs, as opined by entrepreneurs in the study area.
Information presented in Table 4.1 shows that 58 respondents (nearly 25

per cent – Fig. 4.1) of entrepreneurs said reduction in production during
demonetization. Although the proportion of SSIs expressing decline in
production is 25 per cent it needs to be examined in view of long term impacts
of demonetization on production. Across the districts, more number of
entrepreneurs in Kalaburgi revealed that demonetization had adverse impact on
their production and they also had expressed that demonetization reduced cash
availability. This indicates that immediate effect of demonetization is reduction
in SSIs production. Reduction in production was also experienced by
entrepreneurs in Bangalore also (over 20 per cent). The results indicate that
negative impact of demonetization on production was more in rural areas
compared to urban areas.
Table 4.1: Impact of demonetization on production
Impact on production Bangalore Urban Kalaburgi Total
44 14 58
Decreased
(18.72) (5.96) (24.68)
171 6 177
No change
(72.77) (2.55) (75.32)
215 20 235
Total
(91.49) (8.51) (100)

Fig. 4.1 Impact of demonetization on production (in per cent)

90
79.5
80
75.3
70
70
60
50
40
30
30
24.7
20.5
20
10
0
Decreased No change
Let us examine the impact of demonetization on sales of SSIs, which is
illustrated in Table 4.2. Taking both districts together nearly 25 per cent of
entrepreneurs experienced decline in their sales, and this decline was more in
Kalaburgi district. It is to be noted that decline in sales is due to reduction in
production of SSIs after demonetization. This shows that demonetization
affected adversely on both production and sales of SSIs in study area, and
negative impact was more in rural areas.
Table 4.2: Impact of Demonetization on Sales of SSIs

Sales of SSIs Bangalore Urban Kalaburgi Total
Decreased 44 14 58
(20.5) (70.0) (24.7)
No change 171 6 177
(79.5) (30.0) (75.3)
Total 215 20 235
(100.0) (100.0) (100.0)
Source: Survey Data

4.1. Impact of Demonetization on Production and Revenue of Small Scale

Industries – Industrial Classification-wise Analysis
Production and revenue play an important role in decisions on

manufacturing, because every entrepreneur aims at maximising revenue. In this
regard the present study attempted to examine impacts of demonetization on
production and revenue or receipts of SSIs. This study considers output
produced and revenue received as an indicator of performance of SSIs. Hence,
production and revenue of these SSIs have been used as common indicators to
know the impact of demonetization on SSIs in the study area. Revenue of SSIs
for months before demonetisation, during demonetization and after
demonetisation was collected, and production and revenue per firm of these
SSIs is presented below. Period covered in this regard is between (1) April and
October 2016 (before demonetisation), (2) November and December 2016
(during demonetization) and (3) January and May 2017 (after demonetization).
A point to be noted here is that the study considered only total revenue for
assessment as revenue details were available in a relatively accurate manner as
compared to expenditure data of firms. Entrepreneurs were hesitant to share
information on financial, production and other aspects. Hence, with the
available data this study has attempted to examine impacts of demonetization.
Due to the above limitation cost analysis, like input cost, and profit – loss
analysis could not be carried out in the study. However, an analysis of changes
in production in terms of quantity and revenue during the study period would
reveal impacts of demonetization on SSIs. In the above background impact of
demonetization on production and revenue has been presented across categories
of industries based on national industrial classification, following before, during
and after demonetization approach.

4.1.1. Impact on Other Mining and Quarrying SSI Units
Table 4.3 illustrates production and revenue details of firms in category

of other mining and quarrying. These units were observed only in Kalaburgi and
not in the study area of Bangalore Urban district. Before demonetization these
SSIs units were carrying out crushing and polishing of stone to the tune of over
55 thousand meters (in October 2016). It is to be noted that production has been
declining among these SSI units before demonetization period. During
demonetization period production fell sharply to 47.63 thousand metres in
November 2016 and to 46.75 thousand metres in December 2016. This indicates
the negative impacts of demonetization on production in other mining and
quarrying activities. This is because, as reported by entrepreneurs, customers
did not come forward for purchase during those months and hence they could
not produce more. However, production among these units was revived from
January 2017, i.e., after demonetization.
Revenue of these firms also declined during demonetization period as

observed in the Table, which reveals decline in revenue from Rs. 76.27
thousand in October, 2016 to Rs. 65.49 thousand in November 2016 and further
to Rs 64.28 thousand in December 2016. This indicates that on an average each
firm lost over Rs. 10 to 12 thousand during demonetization period.

Table 4.3: Production and Revenue in firms of category Other Mining and Quarrying
Quantity in Metres per firm Revenue in Rs. per firm
Month Bangalore Kalaburgi Total Bangalore Kalaburgi Total
Urban Urban
Before demonetization
April 2016 0 639375 639375 0 876250 876250
May 2016 0 616125 616125 0 845000 845000
June 2016 0 511500 511500 0 704375 704375
July 2016 0 488250 488250 0 670000 670000
August 2016 0 511500 511500 0 700625 700625
September 2016 0 488250 488250 0 667500 667500
October 2016 0 555500 555500 0 762712 762712
During demonetization
November 2016 0 476313 476313 0 654973 654973
December 2016 0 467563 467563 0 642853 642853
After demonetization
January 2017 0 563813 563813 0 772813 772813
February 2017 0 517313 517313 0 708438 708438
March 2017 0 488250 488250 0 668125 668125
April 2017 0 441750 441750 0 607500 607500
May 2017 0 401063 401063 0 550938 550938
Note: includes stone crusher and stone polishing units
Source: Survey data
4.1.2. Impacts on Manufacture of Food Products and Beverages Units

Impact of demonetization on production and revenue of manufacturing of
food products and beverages firms such as milling, graining and dal production,
is presented in Table 4.4, which shows three periods of production and revenue
information. It is observed that in October 2016 taking all food products firms
from both districts the production was over 3 tonnes. The production has
declined from 4 tonnes in April 2016 to 3 tonnes in October 2016. Production
declined during demonetization period i.e., to 2.5 tonnes in November 2016,
which started increasing only in March 2017. These entrepreneurs revealed that
production was reduced because of uncertain situation due to demonetization

and reduction in supply of raw materials. Production across the districts reveal
relatively higher production per firm in Kalaburgi compared to that in
Bangalore Urban district. However, it can be noticed that in both districts
production has fell during demonetization period and the decline is more in
Bangalore Urban district compared to Kalaburgi. Further, revenue per unit
presented in the table also depicts decline during demonetization to Rs. 1.25
lakh (November 2016) from Rs. 1.65 lakh (October 2016). Therefore, results
show that during demonetization SSIs units belonging to food and beverage
production experienced reduction in both production and revenue.
Table 4.4: Production and Revenue in firms of Manufacture of Food Products and Beverages
Month Quantity in Tonnes per firm Revenue in Rs. per firm
Bangalore Kalaburgi Total Bangalore Kalaburgi Total
Urban Urban
Before Demonetization
April 2016 3.3 5.0 4.0 166333 255000 201800
May 2016 3.3 4.0 3.6 166333 205000 181800
June 2016 3.6 4.5 4.0 183667 230000 202200
July 2016 3.5 4.0 3.7 175000 205000 187000
August 2016 3.3 4.0 3.6 166333 205000 181800
September 2016 3.3 4.0 3.6 166333 205000 181800
October 2016 3.3 3.3 3.3 166333 165000 165800
During Demonetization
November 2016 2.3 2.8 2.5 116000 140000 125600
December 2016 2.1 2.5 2.3 105667 127500 114400
After Demonetization
January 2017 2.3 2.8 2.5 117667 140000 126600
February 2017 2.3 2.8 2.5 117667 140000 126600
March 2017 3.3 4.0 3.6 166333 205000 181800
April 2017 3.3 4.0 3.6 166333 205000 181800
May 2017 3.3 4.0 3.6 166333 205000 181800
Note: includes SSI units of milling, graining and dal production
Source: Survey Data

4.1.3. Impacts on firms in Manufacture of Wearing Apparel, Dressing and

Dyeing of Fur
Production and revenue information of firms in the category of

manufacture of wearing apparel, dressing and dyeing of fur is presented in
Table 4.5. Production of apparels declined during demonetization period from
19.7 thousand units in October 2016 to 16.2 thousand units of cloth. This
decline in production was observed in both the study districts, where the decline
was more in Bangalore Urban district compared to Kalaburgi. In Bangalore
Urban district production of apparels was over 21.7 thousand in October 2016
and fell to 17.8 thousand in November 2016, where as in Kalaburgi production
declined from 5.5 thousand units to 5 thousand units. The results indicate that
demonetization has adversely affected SSIs involved in producing apparels,
dresses, and other related activities like embroidery and the impact is more in
urban areas as these units are concentrated more in urban areas like Bangalore.
It is to be noticed that in the period after demonetization production of apparels
has increased in both districts. Similarly, the revenue per firm also declined
during demonetization period taking both districts together and also across
districts.
Table 4.5: Production and Revenue of firms in Category Manufacture of Wearing

Apparel, Dressing and Dyeing of Fur
Month Quantity in Units per firm Revenue in Rs. per firm
Urban Urban
April 2016 21393 5000 19344 3315000 250000 2931875
May 2016 21621 6000 19669 3431429 300000 3040000
June 2016 21443 5500 19450 3311543 275000 2931975
July 2016 21464 5200 19431 3352857 260000 2966250
August 2016 21493 5300 19469 3367143 265000 2979375

September 2016 21557 5400 19538 3397143 270000 3006250

October 2016 21743 5500 19713 3421714 275000 3028375
November 2016 17814 5000 16213 2911000 250000 2578375
December 2016 18700 5100 17000 2996857 255000 2654125
January 2017 28489 5455 25610 3685934 272750 3259286
February 2017 29824 5420 26774 3744714 271000 3310500
March 2017 30714 5500 27563 3869714 275000 3420375
April 2017 31050 5600 27869 3938429 280000 3481125
May 2017 31249 5750 28061 3972006 287500 3511443
Note: includes Manufacture of shirts, garments, shirt labels, jeans, embroidery work
Source: Survey Data
4.1.4. Impact on Manufacture of Paper and Paper Products
Information presented in Table 4.6 shows impact of demonetization on

SSI units manufacturing paper products such as paper tubes, spiral containers,
and cups. These units were observed in Bangalore Urban district. Impact of
demonetization on production of these units is clearly visible as production
came down from 30 thousand units in October 2016 to 29 thousand units in
November 2016. Before demonetization the production was over 30 thousand
units and it declined to 29 thousand during demonetization. However, the
production has increased after demonetization to over 31 thousand units.
Revenue earned by these SSIs was nearly Rs. 65 thousand before

demonetization and declined to Rs. 55 thousand in November 2016 i.e., during
demonetization. After demonetization period revenue per firm has increased
which was Rs. 64 thousand in May 2017. Demonetization, as observed, has
reduced income of these manufacturing units during its process.

Table 4.6: Manufacture of Paper and Paper Products

Urban Urban
April 2016 29680 0 29680 640000 0 640000
May 2016 30515 0 30515 650000 0 650000
June 2016 30349 0 30349 648667 0 648667
July 2016 30516 0 30516 650667 0 650667
August 2016 30683 0 30683 653333 0 653333
September 2016 30013 0 30013 643000 0 643000
October 2016 30514 0 30514 649000 0 649000
November 2016 29233 0 29233 552667 0 552667
December 2016 29637 0 29637 530667 0 530667
January 2017 29567 0 29567 526667 0 526667
February 2017 31078 0 31078 523333 0 523333
March 2017 31623 0 31623 596733 0 596733
April 2017 31483 0 31483 611833 0 611833
May 2017 31667 0 31667 646667 0 646667
Note: includes manufacture of paper tubes, spiral containers, cups
Source: Survey Data
4.1.5. Impact on Demonetization on Printing related SSIs
Impact of demonetization on printing related SSIs is presented in Table

4.7 both in terms of production and revenue in three periods. SSIs were
producing 9.4 thousand units (in October 2016) and it declined to 8.2 thousand
in November 2016 indicating the negative effects of demonetization. The
entrepreneurs reported that demand declined during the months of
demonetization i.e., November and December 2016. Across the districts also
decline in production has been observed and the fall is high in Kalaburgi

district, which declined from 10.5 thousand units in October 2016 to 8.5
thousand in November 2016.
Details presented in the table show that revenue per firm declined during
demonetization period, as it came down from Rs. 11.5 lakh to Rs. 9.3 between
October 2016 and November 2016. District-wise revenue of printing related
SSIs shows that in Kalaburgi it declined more than that in Bangalore Urban
district.
Table 4.7: Publishing, Printing and Reproduction of Recorded Media

Quantity in Units per firm Revenue in Rs. per firm
Month Urban Urban
April 2016 8110 11000 9555 902000 1480000 1191000
May 2016 8130 11050 9590 900000 1484000 1192000
June 2016 8158 11083 9621 901640 1486640 1194140
July 2016 8149 11089 9619 899080 1487080 1193080
August 2016 8149 10584 9367 899720 1386720 1143220
September 2016 8060 11500 9780 892000 1580000 1236000
October 2016 8281 10575 9428 927200 1386000 1156600
November 2016 8040 8550 8295 882000 984000 933000
December 2016 7681 7601 7641 864040 848040 856040
January 2017 7685 9600 8643 865000 1248000 1056500
February 2017 8340 10750 9545 918000 1400000 1159000
March 2017 8360 11250 9805 922000 1500000 1211000
April 2017 8470 13050 10760 938000 1854000 1396000
May 2017 8573 11350 9962 952600 1508000 1230300
Note: includes printing related SSIs
Source: Survey Data

4.1.6. Impact of demonetization on SSI Units of chemicals and chemical

products
Impact of demonetization on SSI firms producing chemicals, paints, soap,

painting coats and lubricants, in the category of chemicals and chemical
products is presented in Table 4.8. These firms are observed in Bangalore Urban
district and not in Kalaburgi, which indicates establishment of these SSIs in
more urbanized areas like Bangalore. This might be due to the available market
in these areas. Information presented in the table shows that production of
chemical related products was 152 tonnes per firm in October 2016 and it
declined to 149 tonnes in November 2016, and further to 146 tonnes in
December 2016, showing the negative impact of demonetization. After
demonetization period i.e., from January 2017 production increased but by
April 2016 it declined to 141 tonnes revealing the continued adverse effects of
demonetization. Similarly, revenue of these firms also declined during
demonetization period, i.e., from Rs. 12.26 lakh in October 2016 to Rs. 10.52
lakh in November 2016.
Table 4.8: Manufacture of Chemicals and Chemical Products

Quantity in tonnes per firm Revenue in Rs. per firm
Month Urban Urban
April 2016 148.6 0 148.6 1188244 0 1188244
May 2016 148.0 0 148.0 1170122 0 1170122
June 2016 148.6 0 148.6 1195022 0 1195022
July 2016 148.4 0 148.4 1168711 0 1168711
August 2016 148.5 0 148.5 1164378 0 1164378
September 2016 150.8 0 150.8 1199267 0 1199267
October 2016 152.7 0 152.7 1226700 0 1226700

November 2016 149.9 0 149.9 1052500 0 1052500
December 2016 146.8 0 146.8 1108489 0 1108489
January 2017 147.8 0 147.8 1288833 0 1288833
February 2017 149.1 0 149.1 1198711 0 1198711
March 2017 150.1 0 150.1 1284389 0 1284389
April 2017 141.2 0 141.2 1268889 0 1268889
May 2017 141.4 0 141.4 1222133 0 1222133
Note: includes manufacture of chemicals, paints, soap, paintings coats and lubricants
Source: Survey Data
4.1.7. Impact on firms manufacturing rubber and plastic products
Table 4.9 illustrates production and revenue details of SSI firms involved
manufacturing plastic and rubber products, in which output is measured in
number of units. Impact of demonetization on these firms is visible in both
production and revenue as both have declined during demonetization period.
Output was over 40 thousand units in October 2016 which declined to 34
thousand in November 2016. Similarly, the revenue also declined from
Rs.19.46 lakh to Rs. 17.69 lakh between October and November, which shows
negative impacts of demonetization.
Table 4.9: Manufacture of Rubber and Plastic Products

Month Quantity in units per firm Revenue in Rs. per firm
Urban Urban
April 2016 37093 0 37093 1766343 0 1766343
May 2016 36606 0 36606 1846519 0 1846519
June 2016 38420 0 38420 1930063 0 1930063
July 2016 40210 0 40210 1949293 0 1949293
August 2016 41395 0 41395 1842866 0 1842866

September 2016 41610 0 41610 1892703 0 1892703

October 2016 40245 0 40245 1946904 0 1946904
November 2016 34843 0 34843 1769409 0 1769409
December 2016 37000 0 37000 1907539 0 1907539
January 2017 41501 0 41501 1996236 0 1996236
February 2017 42618 0 42618 1931113 0 1931113
March 2017 43451 0 43451 2060651 0 2060651
April 2017 45906 0 45906 2117644 0 2117644
May 2017 44333 0 44333 2183776 0 2183776
Note: includes manufacture of plastic bottles, rubber parts, pipes, shoes, plastic materials
(Output measured in number of units)
Source: Survey Data
Information on SSIs producing rubber and plastic products, in which

output is measured in tonnes, is presented in Table 4.10. Production of these SSI
units was 21.5 tonnes in October 2016, which declined to 20 tonnes in
November 2016, revealing negative impacts of demonetization. The declining
trend in production was also observed across the study districts. Revenue of
these firms also fell during demonetization period, i.e., from Rs. 8.31 lakh in
October 2016 to Rs. 6.5 lakh in November 2016. Among the districts also
revenue per firm fell sharply, where in Bangalore Urban district it declined from
Rs. 9.33 lakh in October to Rs. 7.34 lakh in November 2016 and in Kalaburgi
from Rs. 16 thousand to Rs. 8 thousand. All this shows that during
demonetization period production and revenue fell among these SSIs in the
study area.

Table 4.10: Manufacture of Rubber and Plastic Products

Month Urban Urban
April 2016 23.19 0.05 20.6 903316 16364 804765
May 2016 25.04 0.05 22.3 951083 17018 847298
June 2016 25.20 0.05 22.4 969644 16364 863724
July 2016 23.21 0.05 20.6 855114 14727 761737
August 2016 23.20 0.05 20.6 862298 16364 768305
September 2016 23.53 0.05 20.9 902521 16364 804059
October 2016 24.14 0.05 21.5 933189 16364 831319
November 2016 22.89 0.03 20.3 734202 9818 653715
December 2016 23.27 0.04 20.7 796644 13091 709583
January 2017 23.54 0.05 20.9 937314 16364 834986
February 2017 24.54 0.05 21.8 946463 16364 843118
March 2017 24.43 0.05 21.7 897764 16364 799830
April 2017 23.61 0.05 21.0 894221 16364 796681
May 2017 23.86 0.05 21.2 919244 16364 818924
Note: includes manufacturing of plastic powder, plastic rubber, packaging materials, plastic
paper, covers (output measured in tonnes)
Source: Survey Data
4.1.8. Impact of demonetization on SSI units of manufacture of fabricated

metal products, except machinery and equipment
Production and revenue pattern of SSI units involved in manufacture of
fabricated metal products, except machinery and equipment, among which
output is measured in number of units, is presented in Table 4.11, for periods
before, during and after demonetization. It can be observed from the table that
before demonetization production was over 4 thousand units, for example in
October 2016 it was over 4.3 thousand. But, the production was 3.4 thousand in
November and 3.6 thousand in December 2016. This illustrates that production
in SSI firms related to fabricate metal products declined during demonetization.
Production also declined across both the study districts, where in Bangalore

Urban it fell from 4.3 thousand to 3.5 thousand and in Kalaburgi from 2.5
thousand to 1.5 thousand between October and November 2016. During
demonetization period revenue of these firms also declined from Rs. 30.13 lakh
in October to Rs. 26.43 lakh in November 2016.
Table 4.11: Manufacture of Fabricated Metal Products, except Machinery & Equipment
Month Quantity in units per firm Revenue in Rs. per firm
Bangalore Kalaburgi TotalBangalore Kalaburgi Total
Urban Urban
April 2016 4234 2500 4191 2977918 200000 2908470
May 2016 4275 2500 4231 3020635 200000 2950119
June 2016 4375 2500 4328 3050680 200000 2979413
July 2016 4408 2500 4361 3071241 200000 2999460
August 2016 4395 2500 4348 3084911 200000 3012788
September 2016 4341 1250 4264 3066404 100000 2992244
October 2016 4392 2500 4345 3085439 200000 3013304
November 2016 3536 1500 3485 2708018 120000 2643318
December 2016 3667 1200 3606 2767105 96000 2700328
January 2017 3855 1250 3790 3006895 100000 2934223
February 2017 4050 1875 3996 3073968 150000 3000869
March 2017 4113 2500 4072 3087218 200000 3015038
April 2017 4016 2500 3979 3112408 200000 3039598
May 2017 4021 2500 3983 3104947 200000 3032323
Note: includes manufacture of power turbines, coating, electro plating irrigation pipes,
electrical lamination, gear box, panel boards, fabrication, kitchen items (output measured in
number of units)
Source: Survey Data
Impact of demonetization on production and revenue of SSIs related to

manufacture of fabricated metal products, except machinery and equipment, in
which output is measured in tonnes, is presented in Table 4.12. Production

among these firms was around 91 tonnes in October 2016 i.e., before
demonetization and came down to 77 tonnes in November 2016 i.e., during
demonetization. Across the districts also production has declined showing the
negative impacts of demonetization. Similarly, revenue also has been declined
during demonetization period from Rs. 36.34 lakh per firm to Rs. 32.36 lakh per
firm between October and November 2016.
Table 4.12: Manufacture of Fabricated Metal Products, except Machinery & Equipment
Month Urban Urban
April 2016 103.5 50.0 91.6 5143066 1250000 4277940
May 2016 93.2 60.0 85.9 4036912 1500000 3473154
June 2016 95.7 55.0 86.6 4095055 1375000 3490598
July 2016 94.5 55.0 85.7 4045495 1375000 3452051
August 2016 99.0 60.0 90.3 4275495 1500000 3658718
September 2016 99.1 50.0 88.2 4259780 1250000 3590940
October 2016 102.1 52.5 91.1 4297495 1312500 3634162
November 2016 89.7 35.0 77.5 3911484 875000 3236709
December 2016 92.9 30.0 78.9 4288066 750000 3501829
January 2017 98.5 40.0 85.5 4286352 1000000 3556051
February 2017 99.8 47.5 88.2 4191769 1187500 3524154
March 2017 98.4 55.0 88.8 4052769 1375000 3457709
April 2017 98.9 55.0 89.2 4148286 1375000 3532000
May 2017 104.8 60.0 94.8 4154000 1500000 3564222
Note: includes manufacture of MS plate sheets, non-ferrous castings, saw dust, polish machine
and cutting, metal fabrication (Output measured in tonnes)
Source: Survey Data

4.1.9. Impact on Production and Revenue of firms related to Manufacture

of Machinery and equipment Non Electrical Components
Impact of demonetization on firms manufacturing machinery and

equipment - NEC is presented in Table 4.13, which indicates that production on
these firms declined during demonetization as quantity produced per firm came
down from 41.78 thousand units in October 2016 to 32.2 thousand units
November 2016. Across the districts also production has declined during
demonetization period. Revenue of these firms was over Rs. 10.14 crores per
firm in October and declined to Rs. 7.92 crore in November 2016. The average
revenue has declined across the districts also.
Table 4.13: Production and Revenue in firms related to Manufacture of Machinery

and Equipment N E C
Quantity in Units per firm Revenue in Rs. per firm
Month Urban Urban
April 2016 40817 550 40011 97009476 625000 95081786
May 2016 35205 600 34513 81692329 690000 80072282
June 2016 35906 550 35199 81686104 625000 80064882
July 2016 35960 500 35251 82166472 575000 80534642
August 2016 36582 500 35860 85072299 575000 83382353
September 2016 42666 550 41824 103460417 640000 101404009
October 2016 42626 550 41784 103518004 625000 101460143
November 2016 33353 375 32694 80829601 412500 79221259
December 2016 34739 400 34052 81774364 445000 80147776
January 2017 39889 500 39102 96855119 560000 94929217
February 2017 40627 500 39825 97412182 575000 95475439
March 2017 42973 550 42124 103434179 640000 101378296
April 2017 42539 600 41700 103520153 690000 101463550
May 2017 40585 550 39784 97269450 640000 95336861
Source: Survey Data

Note: Group includes manufacture of kitchen equipment, machinery, metal parts, machinery
spare parts, precision auto parts, hydraulic cylinder, dies milling, drills and boring,
automobile, balls and screws, industrial fans and pollution control equipment, engineering
machine, furnaces, holders, solar light poles (output measured in number of units)
Pattern of production and revenue of firms related to manufacture of

machinery and equipment – Non Electrical Components, in which output is
measured in tonnes is presented in Table 4.14. These SSIs units are found in
Bangalore Urban district and involved in producing machinery and copper
products. Output in these units was 637 tonnes in October 2016 and declined to
593 tonnes in November 2016 indicating negative impacts of demonetization on
production. The entrepreneurs reported that because of non-availability of cash
and holding of orders by their customer production was reduced. Production
started increasing only from March 2017, showing that the impact of
demonetization last for long duration to some SSIs. Similarly, revenue per firm
also declined during demonetization as shown in table. In October 2016 the
revenue per firm was Rs. 29.18 lakh and came down to Rs. 27.25 lakh in
November 1016. Therefore, negative impacts of demonetization are clearly seen
in production and revenue of these SSI units.
Table 4.14: Production and Revenue in firms related to Manufacture of Machinery and
Equipment N E C
Month Urban Urban
April 2016 622 0 622 2849167 0 2849167
May 2016 599 0 599 2733000 0 2733000
June 2016 606 0 606 2760667 0 2760667
July 2016 608 0 608 2777833 0 2777833
August 2016 623 0 623 2851667 0 2851667
September 2016 638 0 638 2926667 0 2926667
October 2016 637 0 637 2918333 0 2918333

November 2016 593 0 593 2725000 0 2725000

December 2016 550 0 550 2508333 0 2508333
January 2017 560 0 560 2551667 0 2551667
February 2017 560 0 560 2560000 0 2560000
March 2017 631 0 631 2905000 0 2905000
April 2017 633 0 633 2921667 0 2921667
May 2017 633 0 633 2921667 0 2921667
Note: includes manufacture of machinery and copper products
Source: Survey Data
4.1.10. Impact on firms in Manufacture of Electrical Machinery and

Apparatus
Information presented in Table 4.15 shows impacts of demonetization on

production and revenue of SSI units manufacturing electrical machinery and
apparatus such as panel boards, small transformers, bobbins, etc. in the study
area. Production of these declined during demonetization period as the output
came down from 2700 units in October 2016 to 2650 units per firm as observed
in the table. Similarly, revenue of these firms also declined during the above
period indicating the impact of sudden implementation of demonetization.
Table 4.15: Production and Revenue of firm in Manufacture of Electrical Machinery and
Apparatus
Urban Urban
April 2016 2495 0 2495 1994233 0 1994233
May 2016 2504 0 2504 2021093 0 2021093
June 2016 2537 0 2537 2098045 0 2098045
July 2016 2609 0 2609 2122184 0 2122184
August 2016 2705 0 2705 2311453 0 2311453
September 2016 2630 0 2630 2104793 0 2104793

October 2016 2711 0 2711 2152799 0 2152799

November 2016 2650 0 2650 1884724 0 1884724
December 2016 2698 0 2698 1977709 0 1977709
January 2017 2726 0 2726 1936607 0 1936607
February 2017 2700 0 2700 1998525 0 1998525
March 2017 2863 0 2863 2255500 0 2255500
April 2017 2902 0 2902 2249583 0 2249583
May 2017 3007 0 3007 2305795 0 2305795
Note: includes manufacture of panel boards, small transformer, wire crafts, transfer bobbin,
panel board gasket, capacitors
Source: Survey Data
4.1.11. Impact on firms manufacturing furniture
SSIs are involved in manufacturing furniture in the study area and

information related to impact of demonetization on production and revenue of
these firms is given in Table 4.16. These activities are more in Bangalore urban
district compared to Kalaburgi district. Production of furniture declined during
demonetization as taking both districts together it came down to 852 units from
1054 units between October 2016 and November 2016. Revenue also declined
during this period showing the adverse impacts of demonetization on earning of
SSIs.

Table 4.16: Production and Revenue in firms Manufacture of Furniture

Urban Urban
April 2016 1213 250 1020 693750 27500 560500
May 2016 1187 200 990 703750 22000 567400
June 2016 1195 200 996 694000 22000 559600
July 2016 1210 210 1010 701750 23100 566020
August 2016 1225 200 1020 700125 22000 564500
September 2016 1242 200 1034 705125 22000 568500
October 2016 1265 210 1054 705375 23100 568920
November 2016 1018 190 852 608125 20900 490680
December 2016 1054 190 881 603750 20900 487180
January 2017 1125 190 938 655000 20900 528180
February 2017 1190 200 992 693750 22000 559400
March 2017 1295 200 1076 792500 22000 638400
April 2017 1216 200 1013 709500 22000 572000
May 2017 1241 200 1033 720000 22000 580400

Note: includes manufacturing furniture like college desks, gym products, dental chairs, etc.
Source: Survey Data

4.1.12. Impact of Demonetization on Revenue of all SSIs together
An aggregate view of impact of demonetization on revenue of small scale

industries, covered in the study, is presented in Table 4.17. It can be observed
that before demonetization taking all SSIs together had revenue of Rs. 484.6
lakh per firm in October 2016 and the revenue declined to Rs. 379.67 lakh per
SSI in November 2016, i.e., during demonetization. Across the districts also
same declining trend has been observed during demonetization period.
Negative impact of demonetization, i.e., decline in revenue per firm was
observed across all categories of industries.
The above analysis of production and revenue of small scale industries in

Bangalore Urban and Kalaburgi districts indicate that sudden implementation of
demonetization had reduced production and revenue of these manufacturing
units during demonetization period. Decline in average revenue of SSIs might
be due to factors like reduction in cash availability, non -supply of raw
materials, etc. which are discussed in this report. It is to be noted that the
average revenue of SSIs increased after and reached the level of previous year,
which means that during this period production was reduced, this observation is
in line with opinion of entrepreneurs and also as evidenced by other studies
reviewed earlier. This scenario of fluctuation in average revenue of SSIs is also
true across Bangalore Urban and Kalaburgi districts. But, an important point to
note is that the average revenue of SSIs in Kalaburgi is relatively less than that
of SSIs in Bangalore Urban district. This might be due to changes in type of
SSIs in these two districts.

Table 4.17: Revenue across industrial categories (NIC based category and Revenue Rs. in Lakh per firm)
NIC Augu Octob Novem Decem Janua
April May June July Sept. Februa March April May
Classification/ st er ber ber ry
2016 2016 2016 2016 2016 ry 2017 2017 2017 2017
District 2016 2016 2016 2016 2017
Other Mining and Quarrying
Kalaburgi 8.76 8.45 7.04 6.70 7.01 6.68 7.63 6.55 6.43 7.73 7.08 6.68 6.08 5.51
Total 8.76 8.45 7.04 6.70 7.01 6.68 7.63 6.55 6.43 7.73 7.08 6.68 6.08 5.51
Manufacture of Food Products and Beverages
Bangalore
1.66 1.66 1.84 1.75 1.66 1.66 1.66 1.16 1.06 1.18 1.18 1.66 1.66 1.66
Urban
Kalaburgi 2.55 2.05 2.30 2.05 2.05 2.05 1.65 1.40 1.28 1.40 1.40 2.05 2.05 2.05
Total 2.02 1.82 2.02 1.87 1.82 1.82 1.66 1.26 1.14 1.27 1.27 1.82 1.82 1.82
Manufacture of Wearing Apparel, Dressing and Dyeing of Fur
Bangalore
33.15 34.31 33.12 33.53 33.67 33.97 34.22 29.11 29.97 36.86 37.45 38.70 39.38 39.72
Urban
Kalaburgi 2.50 3.00 2.75 2.60 2.65 2.70 2.75 2.50 2.55 2.73 2.71 2.75 2.80 2.88
Total 29.32 30.40 29.32 29.66 29.79 30.06 30.28 25.78 26.54 32.59 33.11 34.20 34.81 35.11
Manufacture of Paper and Paper Products
Bangalore
6.40 6.50 6.49 6.51 6.53 6.43 6.49 5.53 5.31 5.27 5.23 7.13 7.15 6.60
Urban
Total 6.40 6.50 6.49 6.51 6.53 6.43 6.49 5.53 5.31 5.27 5.23 7.13 7.15 6.60

Publishing, Printing and Reproduction of Recorded Media

Bangalore Urban 9.02 9.00 9.02 8.99 9.00 8.92 9.27 8.82 8.64 8.65 9.18 9.22 9.38 9.53
Kalaburgi 14.80 14.84 14.87 14.87 13.87 15.80 13.86 9.84 8.48 12.48 14.00 15.00 18.54 15.08
Total 11.91 11.92 11.94 11.93 11.43 12.36 11.57 9.33 8.56 10.57 11.59 12.11 13.96 12.30
Manufacture of Chemicals and Chemical Products
Bangalore Urban 11.88 11.70 11.95 11.69 11.64 11.99 12.27 10.53 11.08 12.89 11.99 12.84 12.69 12.22
Total 11.88 11.70 11.95 11.69 11.64 11.99 12.27 10.53 11.08 12.89 11.99 12.84 12.69 12.22
Manufacture of Rubber and Plastic Products
Bangalore Urban 26.70 27.98 29.00 28.04 27.05 27.95 28.80 25.04 27.04 29.34 28.78 29.58 30.12 31.03
Kalaburgi 0.16 0.17 0.16 0.15 0.16 0.16 0.16 0.10 0.13 0.16 0.16 0.16 0.16 0.16
Total 25.71 26.94 27.94 27.11 26.11 26.97 27.78 24.23 26.17 28.31 27.74 28.60 29.14 30.03
Manufacture of Fabricated Metal Products except Machinery and Equipment
Bangalore Urban 81.2 70.6 71.5 71.2 73.6 73.3 73.8 66.2 70.6 72.9 72.7 71.4 72.6 72.6
Kalaburgi 14.5 17.0 15.8 15.8 17.0 13.5 15.1 10.0 8.5 11.0 13.4 15.8 15.8 17.0
Total 71.9 64.2 64.7 64.5 66.7 65.8 66.5 58.8 62.0 64.9 65.3 64.7 65.7 66.0
Manufacture of Machinery and Equipment N E C
Bangalore Urban 998.6 844.3 844.5 849.4 879.2 1063.9 1064.4 835.5 842.8 994.1 999.7 1063.4 1064.4 1001.9
Kalaburgi 6.3 6.9 6.3 5.8 5.8 6.4 6.3 4.1 4.5 5.6 5.8 6.4 6.9 6.4
Total 979.3 828.1 828.3 833.1 862.3 1043.3 1043.8 819.5 826.6 974.8 980.4 1042.8 1043.9 982.6

Manufacture of Electrical Machinery and Apparatus

Bangalore
19.94 20.21 20.98 21.22 23.11 21.05 21.53 18.85 19.78 19.37 19.99 22.56 22.50 23.06
Urban
Total 19.94 20.21 20.98 21.22 23.11 21.05 21.53 18.85 19.78 19.37 19.99 22.56 22.50 23.06
Manufacture of Furniture
Bangalore
6.94 7.04 6.94 7.02 7.00 7.05 7.05 6.08 6.04 6.55 6.94 7.93 7.10 7.20
Urban
Kalaburgi 0.28 0.22 0.22 0.23 0.22 0.22 0.23 0.21 0.21 0.21 0.22 0.22 0.22 0.22
Total 5.61 5.67 5.60 5.66 5.65 5.69 5.69 4.91 4.87 5.28 5.59 6.38 5.72 5.80
All SSIs together
Bangalore
454.69 384.71 384.85 387.06 400.48 484.19 484.61 379.67 384.41 453.99 456.62 484.49 485.00 456.59
Urban
Kalaburgi 8.72 8.89 8.15 7.93 7.81 7.91 7.89 5.99 5.58 7.33 7.45 7.74 8.45 7.96
Total 416.74 352.72 352.80 354.79 367.06 443.66 444.04 347.87 352.17 415.98 418.39 443.92 444.44 418.40
Source: Survey Data

4.2. Impact of demonetization on employment
Another adverse impact of demonetization expected was on employment

in SSIs, as shown by some studies (review of literature). This study attempted to
elicit information on impact of demonetization on employment in the study
area. Table 4.18 presents information on impact of demonetization on
temporary employment as reported by entrepreneurs, which illustrates decrease
in temporary employment (over 14 per cent of SSIs). But, even this decline also
should be taken into consideration as these workers who are usually less skilled
have to face unemployment and associated problems all of a sudden because of
demonetization. This problem is more in rural area compared to that in urban
area, as decline in temporary employment is more in Kalaburgi, 40 per cent,
which might be due to appointment of more number of daily wage labourers
than regular employment. It shows adverse impact of demonetization on wage
labourers.
Table 4.18: Impact of demonetization on employment

Impact on temporary
employment
Decreased 26 8 34
(12.1) (40) (14.47)
No change 189 12 201
(87.9) (60) (85.53)
Total 215 20 235
(100) (100) (100)
Source: Survey Data
This study also collected information on whether SSIs had to relieve any
of their permanent employees or not due to demonetization. Table 4.19 shows
that no permanent staff of SSIs left job during demonetization, in both districts.

This is because SSIs require to keep their permanent employees to carry out
regular production activities and hence there is no decline in this segment of
employment.
Table 4.19: Impact of demonetization on permanent workers

Bangalore
Impact on workers Kalaburgi Total
Urban
Workers left the job 0 0 0
(0.0) (0.0) (0.0)
Workers not left the job 215 20 235
(100.0) (100.0) (100)
Total 215 20 235
(100.0) (100.0) (100.0)
Source: Survey Data
4.3. Opinion on demonetization and its effects on SSIs
Considering the experience of entrepreneurs during and after

demonetization the study attempted to obtain their opinion on whether
demonetization is good or not. This question was asked on the background of
objectives of demonetization i.e., controlling of black money, counterfeit
currency, finance for terrorism related activities and also the problems faced by
due to reduction in cash availability during demonetization. It was observed that
large number of entrepreneurs opined demonetization is not good as it adversely
affected their production related activities, created problems in payments.
Majority of these respondents expressed demonetization should have been
implemented in phase-wise so that people could have adjusted to the new
system.

4.4. Case Studies on Impact of Demonetization
Demonetization brought several changes in the day to day functioning of SSIs.

Let us look at some cases of SSIs which reveal these changes.
Case Study 1: An entrepreneur producing carton boxes in Bangalore Urban

district reported that he could not purchase few input materials, which were
being purchased with cash, because of non-availability of cash due to
demonetization. Hence, he had to stop production of carton boxes on 10 th
November 2016. After arranging money through his bank account he could
purchase and continue production. Further, he mentioned that some orders for
carton boxes got cancelled quoting non-availability of cash. This indicates that
during demonetization production was reduced for non-availability of cash.
Case Study 2: A stone cutting and polishing unit owner in Kalaburgi revealed
that immediately after announcement of demonetization demand for stone
declined. He mentioned that for almost one week hardly any customer visited
his unit to purchase stones or for enquiry about the product and price. Before
demonetization every day at least 15 customers were visiting to enquire about
the price and product. As a result of this he did not place order for new stones
from his suppliers. This development illustrates how production got affected
adversely after demonetization.
Case Study 3: Another stone polishing unit owner in Kalaburgi reported that 4
persons work in his unit and all of them were receiving their wage in cash as
they had no bank account. These workers asked the owner to give their payment
in new currency and not in old currency. But, the owner did not get adequate
new money to pay for his labourers. In order to avoid problems to his staff the
owner took them to grocery shop and purchased the required items for them.
This episode illustrates that labourers in informal sector still demand wage in
cash and non-availability of cash puts them in hardships.

4.5. Overall Views of Entrepreneurs on Demonetization emerged during

Focussed Group Discussion
Implementation of demonetization brought unexpected changes in

spending pattern of people due to shortage of fresh currency. In order to elicit
overall views of owners of SSIs focussed group discussion was held in both
Bangalore Urban and Kalaburgi districts. The discussion focussed on issues
like impacts on production, employment, transactions in banks, etc. during
demonetization. Entrepreneurs and office bearers of Karnataka Small Scale
Industries Association (KASSIA) opined that demonetization was an
unexpected stroke on their production and marketing activities. Participants
expressed that SSIs meet their financial requirements from sources like banks
and private lenders. Dependence on private lenders is high during immediate
needs of money and when formal banking system does not provide financial
assistance to SSIs. Demonetization adversely affected private lenders and in
turn SSIs were also affected due to non-availability of money. Further, during
demonetization even banks were not extending loans, hence SSIs owners faced
difficulties to arrange money all of a sudden. This shows demonetization
affected financial flow to SSIs which affected adversely their regular
transactions like payments, purchases etc. Among SSIs particularly those
working on the basis of job works (i.e., producing fixed quantity of goods,
finished or intermediary, for a fixed amount within a specified time, like
electro-plating) were severely affected as majority of them transact using cash
as reported by the members. All participated members expressed delay in
payments to them and also by them to others. Majority of them opined that
demand for their goods declined due to non-availability of cash, particularly for
those who were transacting through cash. The negative impact was more on
recently started firms, but established SSIs did not face much problems as their
large proportion of transactions are through banks. Entrepreneurs participated in

Kalaburgi district opined that they had cut appointment of daily wage
employees due to non-availability cash. Large number of daily wage earners
does not have their bank accounts and hence paying them through check was
also not possible. Further, the entrepreneurs could not arrange raw materials for
their units during the initial days of demonetization and hence they could not
continue daily wage labourers during that time. This shows that demonetization
adversely affected the labour class. Entrepreneurs in Kalaburgi said that supply
of raw materials declined during demonetization as suppliers were not ready to
accept cheques of banks, instead they preferred wait and watch for some time.
Chairman, KASSIA opined that demonetization adversely affected the

small scale industrial sector, as majority of these units depend on both formal
and informal financial system due to inadequacies in formal financial system.
Entrepreneurs require to provide collateral property, arrange various documents
etc. to obtain financial support from banks, which becomes a major hurdle for
them and hence opt for informal banking which help them to meet day-to-day
expenditures. He said that rules like demonetization may help multi-national
companies than promoting MSMEs in the country considering their financial
health. According to some entrepreneurs, demonetization negatively affected
luxury goods and real estate markets, as cash transaction was high in this
segment of market.
Some of the participating members felt that demonetization might help in

formalizing the financial system, but reduction in cash availability affected their
functioning of SSIs for the reasons mentioned above. The overall opinion of
members participated in the FGDs at both the districts was that sudden
implementation of demonetization created confusion, and their transactions
affected severely as it took time for adjusting to new system.

To sum up: This chapter analysed the impacts of demonetization on production,

sales, revenue and employment of SSIs in the study area. It was observed that
production, sales, revenue declined during demonetization. The study found that
the daily wage labourers and less skilled workers faced more problems as SSIs
reduced their labour usage. Entrepreneurs of SSI opined during focus group
discussion that owners of SSI had to undergo difficult time due to non-
availability of funds during demonetization, and the problem was high for job
work based units and recently started units. Demonetization according to SSI
owners was not called for as it reduced production, sales and revenue.


Conclusions and Suggestions
Chapter V
5.1. Introduction
Money, a medium of exchange, is backbone of transactions in modern

economies. Different roles like medium of exchange, store of value and unit of
account, performed by money are crucial for carrying out production and
consumption activities in the economy. Monetary policy of any country
determines supply and demand for money and changes in monetary policy will
affect demand and supply of money. Government in India brought a major
monetary policy change in November 8, 2016 by implementing demonetization
of specified currencies, i.e. Rs. 500 and Rs. 1000. Demonetization was
introduced with objectives of (1) Elimination of fake currency, (2) Elimination
of black money, and (3) Control of subversive activities. Objectives of
demonetization were aimed at controlling illegal activities by withdrawing
existing high denomination currencies with new currencies. At the time of
demonetization specified currencies were to the tune of 86.4 per cent of total
currencies in circulation. In this background the government introduced
demonetization to meet above mentioned objectives, besides moving towards
cash less economy using modern technology based electronic transactions.
Demonetization is a monetary process of stripping a currency unit of its

legal tender status, which results in withdrawing currency from circulation. It is
seen as a move to discourage people from cash transactions and encourage
people to use cash less transactions. Demonetization has been introduced in
various other countries also over time to meet different objectives like
controlling excess liquidity, inflation, black money, etc. In the beginning days
of demonetization people experienced difficulties in exchanging old currency to
new currency, this was accentuated by inadequate supply of new currencies. It

was reported by media that people stood in long lines in front of ATMs and
banks to obtain new currencies. It was observed that demonetization promoted
digital transactions. Keeping in view impacts of demonetization on all sectors of
the economy, this study tried to analyse impacts of demonetization on SSIs in
Karnataka.
5.2. Objectives and Approach
Review of literature illustrated limited number of studies on small scale

industries. Some of the available studies are narrow in coverage of issues and
samples. Hence, this study tried to fill this gap on impacts of demonetization on
SSIs.
This study has been conducted in Karnataka, as it is one of the important

states in terms of contribution from SSIs with 3.82 lakh units employing 22.77
lakh people. This study is limited to SSIs in Karnataka only and the reference
period is April 2016 to May 2017. Objectives of the study were to understand
need and context for demonetization in India, study revenue of SSIs, examine
impacts demonetization on production, sale and employment, and to understand
gains or losses to SSIs during demonetization. Both secondary and primary data
were used in the study. Secondary data were collected from Government
Records while primary data were collected from study districts Bangalore
Urban and Kalaburgi, which respectively represent urban and rural areas.
Structured schedules were canvassed among 235 SSI units to elicit information
on impacts of demonetization.
Small scale industries in India have been renamed as micro, small and
medium enterprises and been classified on the basis investment in
manufacturing and service sectors. Among 634 lakh units, large number of
MSMEs are micro units at 630.52 lakh, which have invested less than Rs. 25
lakhs in manufacturing and less than Rs. 10 lakhs in services, constitute a major

share. Uttar Pradesh and West Bengal have large number of MSMEs compared
to other states in India. Karnataka has over 38 lakh units of MSMEs.
Employment generation is another important contribution of MSMEs in

the economy as over 11 crore jobs have been created during 2015-16, in which
micro enterprises have contributed more. State-wise distribution of employment
shows that more job opportunities have been created in Uttar Pradesh and West
Bengal by SSIs.
Karnataka is an important industrial state promoting high technology

based, capital intensive and knowledge based industries. It is considered as a
desired place for establishing large and small scale industries.
In order to examine effects of demonetization on SSIs Bangalore Urban

district and Kalaburgi districts were selected for collection of data. Bangalore
Urban district comprises 90.94 per cent of its population in urban area, while
Kalaburgi has 67.44 per cent of people in rural area representing urban and rural
areas respectively.
The study observed that Karnataka has 13959 factories, including

readymade garments, textiles, chemical and engineering employing over 15
lakh people. Bangalore Urban district has over 43 per cent of factories, while it
is around 1 per cent in Kalaburgi. Industrial sheds are important infrastructure
in promoting industrial activities. Karnataka has 176 industrial estates thus
encouraging industrial growth. The state has 3.82 lakh SSI units providing
employment for 22.77 lakh people, out of which Bangalore Urban district has
largest share, owing to the advantages it has over other districts in the state.
However, reasons for this skewed establishment of industries need to be studied
and growth of industries should be promoted in other districts also.

This study covered 235 small scale industries taking 215 samples from
Bangalore North taluk in Bangalore Urban district and 20 samples from
Kalaburgi and Chittapur taluks in Kalaburgi district. Categorization of SSIs
according to National Industrial Classification showed that units related to
machinery and equipment - non electrical components (103 out of 235 SSIs)
were more in number followed by manufacture of fabricated metal products -
except machinery and equipment taking both districts together, and also in
Bangalore Urban district. But, in Kalaburgi district mining and quarrying units
are more in number (8 out of 20).
The study found that in the study area large number of MSMEs (62 per
cent) was established during the period 2001-10, which might be due to changes
in industrial policies to capture opportunities provided by economic reforms. It
was observed that majority of SSIs (84 per cent) under study had markets in few
districts around their location, which indicates SSIs meeting local demands.
This point shows that SSIs should be encouraged in other districts also to meet
demands of those regions. The study found that establishment cost of SSIs was
on an average over Rs. 1.5 crores from both districts together, which shows that
large number units fall in the category of small scale industries according to the
MSME classification. Analysis of average revenue of SSIs revealed decline in
revenue from Rs. 5.16 crores in 2011 – 12 to Rs. 4.41 crores in 2016 – 17.
Entrepreneurs opined that reduction in demand, lack of financial support,
increased competition were factors for decline in revenue.
5.3. Views of SSI entrepreneurs on demonetization - Summary

Large number of entrepreneurs opined that demonetization was an
unexpected move by the government, as 93 per cent of respondents came to
know about demonetization through television. Electronic media is the major
medium of communication as large number of SSIs owners came to know about
demonetization through television.

SSIs faced problems in carrying out their day to day transactions due to
reduction in cash availability. It affected salary payment (26 per cent of SSIs) to
employees, purchasing of raw materials (6 per cent), etc. The impact was more
in rural areas as observed in Kalaburgi district.
The study found that entrepreneurs adopted different measures like using
cash in hand (14 per cent) to borrow loan to meet the requirements. It was
observed that cash usage is more in Bangalore than Kalaburgi as more per cent
of SSI owners used cash with them during demonetization as compared to
Kalaburgi district, where 65 per cent of entrepreneurs resorted to borrowing to
manage cash inadequacy. This shows that urban entrepreneurs hold more cash
than rural entrepreneurs, which might be the reason for borrowing by large
number of SSIs in Kalaburgi.
The study revealed relatively large proportion of entrepreneurs (22 per

cent) faced problems while transacting with banks. It is to be noted that even 22
per cent of respondents is not a small proportion as the point is that they have
faced problems with banks either for exchanging old notes or getting new
currencies. These types of problems need to be addressed by financial
organizations in order to accommodate new changes and to make institutions
customer friendly.
5.4. Findings of the Study
Findings of impact of demonetization on production, sales, revenue and

employment are summarized below:
Demonetization process adversely affected production of SSIs in the

study region as reported by 25 per cent of respondents. More number of
entrepreneurs (70 per cent) in Kalaburgi district experienced decline in
production. This needs to be examined in detail with a larger study covering

long term impacts of demonetization on production of SSIs, in both rural and

urban areas.
SSIs reported reduction in sales (25 per cent of SSIs) during

demonetization due to reduced production and also non-availability of cash. The
reduction was more in rural areas (Kalaburgi – 70 per cent of SSIs) as observed
in the study.
Reduction in production and sales of SSIs resulted decline in average

revenue of these units as evidenced in the study. The average revenue which
had declining trend before demonetization fell sharply during demonetization. It
was Rs 484.6 lakh in October 2016 and declined to Rs. 379.67 lakh in
November showing significant fall in few month period. However, average
revenue of SSIs to some extent recovered after demonetization period. This
reveals that during its process demonetization created negative impacts on
production, sales and revenue of SSIs.
On employment side demonetization impacted adversely on temporary

job workers (14 per cent of SSIs) as in the study area entrepreneurs had to stop
engaging temporary workers due to non-availability of cash. Loss of temporary
employment is high in Kalaburgi district (40 per cent), which shows
vulnerability of rural less skilled labourers during sudden shocks. The study
indicated that casual and less skilled workers suffered most during
demonetization.
The study observed that relatively large number of entrepreneurs opining

that demonetization was not a good move as it adversely affected production
and revenue of SSIs.
Focus group discussion with entrepreneurs revealed that demonetization

affected private money lenders and this in turn affected SSI owners also,

explaining the need to strengthen financial system to meet needs of SSIs.

Further, it was opined that SSIs which function on job work basis suffered more
due to demonetization, as most of them deal in cash. All members said delay
payments. The discussion revealed that impact of demonetization was more on
recently started firms due to non-availability of money. Entrepreneurs faced
problem to pay for their staff and hence some of them relieved their daily wage
labourers.
Overall, entrepreneurs felt that sudden implementation of demonetization

created confusion and problems while severely affecting their business.
5.5. Policy suggestions
Findings of this short term study on impacts of demonetization on SSIs leads to

the following policy suggestions.
5.5.1. Urban area
Demonetization has promoted use of electronic payment system and after

demonetization use of various electronic instruments has considerably
increased. Hence, the practice of using electronic payment system may be
promoted further, particularly in urban areas as provision of these facilities are
available in large number compared to rural areas.
Monetary literacy, in terms of reducing cash usage in transactions and

adopting electronic methods of payments, among people has to be increased by
creating awareness on advantages.
Use of electronic methods of payments has increased finance related

cyber-crime, as evidenced in review of literature. Hence, adequate security
measures need to be implemented to control finance related cyber-crimes and

protect customers from losing their money. Otherwise, trust of people on new
methods of payment might be reduced.

casual and less skilled labourers. Hence, efforts need to be taken to protect these
groups from adverse impacts of policy changes.
5.5.2. Rural areas
Monetary literacy, in terms of reducing cash usage in transactions and

adopting electronic methods of payments, among people has to be increased by
creating awareness on advantages.
SSI units create significant number of job opportunities, but there is

variation across urban and rural areas in establishment of SSIs. Hence, growth
of industries may be promoted in other districts also to create employment
opportunities, particularly in rural areas.
SSIs are supplying goods and services to local markets, which shows that
SSIs should be encouraged in all districts to meet demands of these regions.
Inadequate financial support system was a major reason for the

difficulties of entrepreneurs and hence this problem need to be addressed by
creating financial institutions that help SSIs to meet their immediate monetary
needs.

casual and less skilled labourers. Hence, efforts need to be taken to protect these
groups from adverse impacts of policy changes, with adequate safety measures.

Annexure 1: List of References cited in the Report
Arun Kumar (2017) Economic Consequences of Demonetization - Money

Supply and Economic Structure, Vol. LII No. 1, Economic & Political Weekly.
Basil Hans V.
Beg, Sana and Joshi, Nandita (2017). Public Perception of the Impact of
Demonetization in India : An Empirical Study. Journal of Commerce and Trade
Vol. 12, No. 2; Pp.68–75. https://doi.org/10.26703/JCT.v12i2-11
Dash A. (2017) A Study on Socio Economic Effect of Demonetization in India,

International Journal of Management and Applied Science, ISSN: 2394-7926
Volume-3, Issue-3, Mar.-2017
Gabriel Chodorow-Reich, Gita Gopinath, Prachi Mishra and Abhinav

Narayanan (2018), Cash and the Economy: Evidence from India's
Demonetization, NBER WORKING PAPER SERIES, NATIONAL BUREAU
OF ECONOMIC RESEARCH, http://www.nber.org/papers/w25370
GoI (2016), Karnataka State Industrial Profile 2015-16, MSME-Development

Institute, Bengaluru.
GoI (2017), Government of India (2017), Economic Survey
Hariharan, S., J. Krishnakumar, T. Stephen (2018), ‘A cross-sectional study on

the assessment of impact of demonetization of Rs.500 and Rs.1000 currency
notes on the socio-economic and health status of the people residing in an urban
area of Kanchipuram district’, International Journal of Community Medicine
and Public Health, Vol. 5(5):1951-195,Website: http://www.ijcmph.com; DOI:
http://dx.doi.org/10.18203/2394-6040.ijcmph20181704
Litvack Leon and Samuel Vigne (2017), Demonetisation in India and Emerging
Challenges, Queen’s University Belfast, Northern Ireland; downloaded from
www.qub.ac.uk

Pawan Kumar (2018), https://arxiv.org/ftp/arxiv/papers/1702/1702.01686.pdf

Downloaded on 20/12/2018
Rebello, J. and Gayatri N. (2016), Demonetisation and its side-effects. The

Economic Times. Retrieved from https://economictimes.indiatimes.com calls
demonetization as a move of scrapping or phasing out of certain currency notes.
Reserve Bank of India – Website
Reserve Bank of India (2017), RBI/2016-17/112 DCM (Plg)

No.1226/10.27.00/2016-17 dated November 08, 2016; downloaded from
www.rbi.org.in.
Ritika Mankar, Sumit ShekharMAY Demonetisation and the Delusion of GDP

Growth, Economic & Political Weekly, May 6, 2017, Vol. LII, No. 18.
Singh, Partap and Virender Singh (2016) Impact of Demonetization on Indian

Economy, Third International Conference on Recent Innovations in Science,
Technology, Management and Environment, Federation of United Nations
Associations, New Delhi.
Vij Dimpal (2018), Demonetization: Effects on Indian Economy, International

Journal of Business and Management, Volume No – XI Issue – 1

Withdrawal of Legal Tender Character of existing ₹500/- and ₹1000/- Bank Notes
Annexure 2
RBI/2016-17/112
DCM (Plg) No.1226/10.27.00/2016-17 November 08,
2016
The Chairman / Managing Director/ Chief Executive Officer,

Public Sector Banks/ Private Sector Banks / Foreign Banks/ Regional Rural
Banks / Urban Cooperative Banks/ State Cooperative Banks
Dear Sir
Withdrawal of Legal Tender Character of existing ₹500/- and ₹1000/-

Bank Notes
In terms of Gazette Notification No 2652 dated November 08, 2016 issued by

Government of India, ₹500 and ₹1000 denominations of Bank Notes of the
existing series issued by Reserve Bank of India (hereinafter referred to as
Specified Bank Notes) shall cease to be legal tender with effect from November
09, 2016, to the extent specified in the Notification. A new series of Bank Notes
called Mahatma Gandhi (New) Series having different size and design,
highlighting the cultural heritage and scientific achievements of the country,
will be issued. Bank branches will be the primary agencies through which the
members of public and other entities will be exchanging the Specified Bank
Notes for Bank Notes in other valid denominations or depositing the Specified
Bank Notes for crediting to their accounts, upto and including the December 30,
2016. Therefore, banks have to accord highest priority to this work.

In order to enable the members of public and other entities to exchange their
existing ₹ 500/- and ₹ 1000/- notes, the following arrangements have to be made
by the banks.
2. Action to be taken on November 09, 2016

i) November 09, 2016 (Wednesday) shall be a non-business working day for all
banks. However, branches will function on that day to carry out preparations
for implementing the scheme as per this circular.
ii) The Specified Bank Notes stocked in ATMs, Cash Deposit Machines, Cash
Recyclers, Coin Vending Machines, any other cash dispensing/receiving

machine, CIT Companies and Business Correspondents attached to the
branch will have to be called back forthwith. The sponsor banks of White
Label ATMs will be responsible for recalling the Specified Bank Notes from
the White Label ATMs sponsored by them.
iii) Banks should take steps to stop issuing Specified Bank Notes through their
branches, business correspondents from November 09, 2016.

iv) All ATMs, Cash Deposit Machines, Cash Recyclers and any other machine
used for receipt and payment of cash shall be shut on November 09 and 10,
2016.
v) All ATMs and cash dispensing machines will have to be re-configured to
disburse bank notes of ₹100/- and ₹50/- denominations prior to reactivation

of the machines on November 11, 2016; however banks should await
separate instructions from Reserve Bank of India on issuing Mahatma Gandhi
(New) series Notes through ATMs and cash dispensing machines though they
can be issued over the counters from November 09, 2016.
vi) Every banking company defined under the Banking Regulation Act, 1949
and every Treasury shall complete and forward a return in the format
specified in Annex-1 showing the details of the Specified Bank Notes held
by it at the close of business as on November 08, 2016, not later than 13:00

hrs on November 10, 2016 to the concerned Regional Office of Reserve Bank
of India under whose jurisdiction the Head office of the bank is located. The
return should also include details of Specified Bank Notes recalled from
ATMs, Cash Deposit Machines, Cash Recyclers, Coin Vending Machines,
CIT Companies, Business Correspondents, etc.
vii) Arrangement should be made by the branches to promptly deposit these

Specified Bank Notes with the linked currency chest / RBI and get the
amount credited to their account.
viii) Branches should estimate their cash requirement and obtain from the linked /
nearby currency chest /RBI Bank Notes of other valid denominations.
ix) Cash Deposits machines / Cash Recyclers should continue to accept
Specified Bank Notes upto December 30, 2016.
x) Information Material for educating the public regarding withdrawal of Legal
Tender character of the Specified Bank Notes (as per Annex-2(a)) and
salient features of the Mahatma Gandhi (New) Series Bank Notes (Annex-
2(b)) are required to be printed/copied in adequate quantity and distributed
to the public / displayed in the banking hall / ATM kiosks.
xi) Banks should identify the staff for managing the exchange counters and brief
them properly about the scheme and the procedure to be followed. A copy of
the FAQs provided in Annex-2(c) may be supplied to the staff manning the
exchange counters.
xii) Banks should provide adequate number of note counting machines, UV
Lamps, note sorting machines etc. at their counters to take care of the work
load and timely detection of counterfeit notes. As already advised vide our
circular No DCM (FNVD) No.1134/16.01.05/2016-17 dated October 27,
2016, the banking hall, public areas and counters should be under CCTV
surveillance and recording should be preserved.

3. Action to be taken on November 10, 2016

a. Bank branches will commence normal operations on November 10, 2016.
b. Banks have to accord top priority to provide facility for exchanging /
accepting deposits of Specified Bank Notes and open additional counters to

meet the public demand and keep the counters open for extended hours, if
necessary. Maximum staff should be deployed for this purpose. If necessary
banks may consider hiring retired employees for a temporary period to take
care of additional work load.
c. Provision of Exchange Facility:
I. The specified bank notes held by a person other than a banking company
referred to in sub-paragraph (1) of paragraph 1 or Government Treasury may
be exchanged at any Issue Office of the Reserve Bank or any branch of public
sector banks, private sector banks, foreign banks, Regional Rural Banks,
Urban Cooperative Banks and State Cooperative Banks for a period up to and
including the December 30, 2016, subject to the following conditions, namely:
II. the specified bank notes of aggregate value of ₹4,000/- or below may be
exchanged for any denomination of bank notes having legal tender character,
with a requisition slip in the format specified by the Reserve Bank and proof
of identity; the limit of ₹4,000/- for exchanging specified bank notes shall be
reviewed after fifteen days from the date of commencement of this
notification and appropriate orders may be issued, where necessary;
III. there shall not be any limit on the quantity or value of the specified bank notes
to be credited to the account maintained with the bank by a person, where the
specified bank notes are tendered; however, where compliance with extant
Know Your Customer (KYC) norms is not complete in an account, the
maximum value of specified bank notes as may be deposited shall be 50,000/-
IV. The equivalent value of specified bank notes tendered may be credited to an
account maintained by the tenderer at any bank in accordance with standard

banking procedure and on production of valid proof of Identity;

V. the equivalent value of specified bank notes tendered may be credited to a
third party account, provided specific authorisation therefor accorded by the
third party is presented to the bank, following standard banking procedure and
on production of valid proof of identity of the person actually tendering, as
indicated in Annex-2(d);
VI. cash withdrawal from a bank account over the counter shall be restricted to
₹10,000/- per day subject to an overall limit of ₹20,000/- a week from the
date of the notification until the end of business hours on November 24,
2016, after which these limits shall be reviewed;
VII. there shall be no restriction on the use of any non-cash method of operating
the account of a person including cheques, demand drafts, credit or debit
cards, mobile wallets and electronic fund transfer mechanisms or the like;
VIII. withdrawal from Automatic Teller Machines (hereinafter referred to as
ATMs) shall be restricted to ₹2,000 per day per card up to November 18,
2016 and the limit shall be raised to ₹ 4,000 per day per card from November
19, 2016;
IX. any person who is unable to exchange or deposit the specified bank notes in
their bank accounts on or before the December 30, 2016, shall be given an
opportunity to do so at specified offices of the Reserve Bank or such other
facility until a later date as may be specified by it.
X. Business Correspondents (BCs) may also be allowed to exchange Specified
Bank Notes upto ₹4000/- per person as in the case of bank branches, against
valid identity proof and requisition slip. For this purpose banks may, at their
discretion, enhance the cash holding limits of BCs at least till December 30,
2016.
XI. While crediting the value of Specified Bank Notes to Jan Dhan Yojna
Accounts, the usual limits will apply mutatis mutandis.

4. Reporting Mechanism
Each bank branch exchanging Bank Notes in the denominations of Rs.500/-

and Rs.1,000/- shall report at the close of business on each day starting from
November 10, 2016 till the closure of the scheme on December 30, 2016 (or
till any other date thereafter as may be advised by RBI) by email or Fax to
their Controlling Office a statement as per Annex-2(e) showing the details of
Specified Bank Notes exchanged by it and the respective Controlling Offices
will aggregate these as per Annex-2(f) and report to the Department of
Currency Management, RBI, Central Office by email on a daily basis.
5. Banks may issue detailed instructions to their branches advising them to

strictly adhere to the norms of the scheme and procedures laid down above.
The staff at the branch level, particularly the tellers, should be adequately
sensitized. For this purpose, information as available at our website
(www.rbi.org.in) and Government of India website may be used. Staff
should familiarise themselves with the FAQs (as per Annex-2(c)).
6. Banks should make copies of information material (As available at Annex-
2(a), Annex-2(b) and Annex-2(c)) and distribute these to the public.
7. Bank should issue instructions to BCs, ATM Switch Operators and CIT
Companies on various aspects of the above scheme relevant to them.
8. Banks should monitor the implementation of the scheme on a day to day
basis through a monitoring cell headed by an Officer not below the rank of a
General Manager, who will act as a Nodal Officer. The Contact details of the
Nodal officer will be reported to the concerned Regional Office of RBI, with
a copy to RBI Central Office, Mumbai through email as indicated below.
9. RBI has opened a Control Room at its Central Office for monitoring the
progress and providing guidance to banks and members of public. The email
id and telephone numbers of the Control room are as under:
Email. Telephone No: 022 22602804 / 022 22602944

Statement to be submitted by bank branches to their Controlling Office by

13:00 hrs on November 09, 2016
Details of withdrawn banknotes in the denominations of ₹500/- and ₹1000/-

held in the custody of the branch including those in ATMs, cash recyclers, Cash
dispensing machines, Coin Vending Machines and any other machine
accepting or disbursing cash, attached to it, as at the midnight of November 08,
2016
Name of the Bank:
Name of the Branch: IFSC Code:
Denomination Number of Pieces Total value
` 500
` 1000
TOTAL
Name ad Designation of the Branch In-charge
Signature of the Branch In-charge
Date:
Place:

Annex-2(a)
Withdrawal of Legal Tender Character from existing series of Bank Notes
in the denominations of ₹ 500 and ₹ 1000 - Salient features of the scheme
1. In terms of Gazette Notification No 2652 dated November 08, 2016 issued by
Government of India, existing series of banknotes in the denominations of

₹500/- and ₹1000/- issued by the Reserve Bank of India upto November 08,
2016, hereinafter referred to as Specified Bank Notes (SBN), shall cease to be
legal tender in payment or on account at any place with effect from the
November 09, 2016.
2. SBN held by a person other than a bank or Government Treasury may be
exchanged at the 19 Issue Offices of the Reserve Bank of India and all branches
of public sector banks, private sector banks, foreign banks, Regional Rural
Banks, Urban Cooperative Banks and State Cooperative banks only upto and
including December 30, 2016, on tender of the SBN subject to the following
conditions:
(a) SBN of aggregate value upto ₹4000 only held by a person can be exchanged by
him/her at any bank branch or Issue Office of Reserve Bank of India for any
other denomination of Banknotes, provided a Requisition Slip as per format
prescribed in Annex-2(d) is presented with proof of identity (as indicated in
Annex-2(d)), along with the High Denomination Banknotes.
(b) Where the aggregate value of the SBN tendered exceeds ₹ 4000, the equivalent
value will be credited to the account of the tenderer maintained with the bank
where the High Denomination Banknotes are tendered. The limit of ₹ 4000/- for
exchanging SBN at bank branches or at Issue Offices of Reserve Bank of India
will be reviewed after 15 days.
(c) There will be not be any limit on the quantity or value of SBN to be credited to
the account of the tenderer, maintained with the bank where the SBN are
tendered.

(d) The equivalent value of the SBN tendered can be credited to an account
maintained by the tenderer at any bank in accordance with standard banking

procedure and on production of valid proof of Identity.
(e) The equivalent value of the SBN tendered can be credited to a third party
account provided specific authorization therefor accorded by the said account

holder is presented to the bank, following standard banking procedure and on
production of valid proof of Identity of the person actually tendering.
(f) In accounts where compliance with extant Know Your Customer (KYC) norms
is not complete, a maximum value of ₹ 50,000/- of SBN can be deposited.

(g) Cash Withdrawal from a bank account over the counter will be restricted to `
10,000/- subject to an overall limit of ₹ 20,000/- in a week for the first fortnight.
(h) There will be no restriction on the use of any non-cash method of operating the
account which will include cheques, demand drafts, credit/debit cards, mobile
wallets and electronic fund transfer mechanisms.
(i) Withdrawal from ATMs would be restricted to ₹ 2,000/- per day per card up to
November 18, 2016. The limit will be raised to ₹ 4,000/- per day per card from
November 19, 2016 onwards. All ATMs will dispense ₹100 and/or ₹50
denomination Banknotes only until further instructions from RBI.
(j) For those who are unable to exchange their SBN on or before December 30,
2016, an opportunity will be given to them to do so at specified offices of the

RBI until a later date, along with necessary documentation as may be specified
by the Reserve Bank of India.

Annex-2(b)
Features of Mahatma Gandhi (New) Series Bank Notes - Salient features of
₹2000/- Bank Note

Salient Features of New ₹500 notes

Annex-2(c):
For Updated FAQs please refer to FAQ section on Banks website
(https://www.rbi.org.in/Scripts/FAQView.aspx?Id=119)
FAQs on Withdrawal of Legal Tender Character of the existing Bank

Notes in the denominations of ` 500/- and ` 1000/-
(Issued on November 08, 2016)
1. Why is this scheme introduced?
The incidence of fake Indian currency notes in higher denomination has

increased. For ordinary persons, the fake notes look similar to genuine notes,
even though no security feature has been copied. The fake notes are used for
antinational and illegal activities. High denomination notes have been misused
by terrorists and for hoarding black money. India remains a cash based
economy hence the circulation of Fake Indian Currency Notes continues to be a
menace. In order to contain the rising incidence of fake notes and black money,
the scheme to withdraw has been introduced.
2. What is this scheme?
The legal tender character of the existing bank notes in denominations of ₹ 500
and ₹ 1000 issued by the Reserve bank of India till November 08, 2016
(hereinafter referred to as Specified Bank Notes) stands withdrawn. In
consequence thereof these Bank Notes cannot be used for transacting business
and/or store of value for future usage. These Bank Notes can be exchanged for
value at any of the 19 offices of the Reserve Bank of India or at any of the bank
branches or at any Head Post Office or Sub-Post Office.
3. How much value will I get?
You will get value for the entire volume of notes tendered at the bank branches
/ RBI offices.
4. Can I get all in cash?
No. You will get upto ₹ 4000 per person in cash irrespective of the size of tender
and anything over and above that will be receivable by way of credit to bank
account.

5. Why I cannot get the entire amount in cash when I have surrendered
everything in cash?
The Scheme does not provide for it, given its objectives.
6. ₹ 4000 cash is insufficient for my need. What to do?
You can use balances in bank accounts to pay for other requirements by
cheque or through electronic means of payments such as Internet banking,
mobile wallets, IMPS, credit/debit cards etc.
7. What if I don’t have any bank account?
You can always open a bank account by approaching a bank branch with
necessary documents required for fulfilling the KYC requirements.
8. What if, if I have only JDY account?
A JDY account holder can avail the exchange facility subject to the caps and
other laid down limits in accord with norms and procedures.
9. Where can I go to exchange the notes?
The exchange facility is available at all Issue Offices of RBI and branches of
commercial banks/RRBS/UCBs/State Co-op banks or at any Head Post
Office or Sub-Post Office.
10. Need I go to my bank branch only?
For exchange upto ₹4000 in cash you may go to any bank branch with valid
identity proof.
For exchange over ₹4000, which will be accorded through credit to Bank
account only, you may go to the branch where you have an account or to any
other branch of the same bank.
In case you want to go to a branch of any other bank where you are not
maintaining an account, you will have to furnish valid identity proof and
bank account details required for electronic fund transfer to your account.
11. Can I go to any branch of my bank?
Yes you can go to any branch of your bank.

12. Can I go to any branch of any other bank?
Yes, you can go to any branch of any other bank. In that case you have to
furnish valid identity proof for exchange in cash; both valid identity proof
and bank account details will be required for electronic fund transfer in case
the amount to be exchanged exceeds ₹ 4000.
13. I have no account but my relative / friend has an account, can I get my
notes exchanged into that account?
Yes, you can do that if the account holder relative/friend etc. gives you
permission in writing. While exchanging, you should provide to the bank,
evidence of permission given by the account holder and your valid identity
proof.
14. Should I go to bank personally or can I send the notes through my

representative?
Personal visit to the branch is preferable. In case it is not possible for you to
visit the branch you may send your representative with an express mandate
i.e. a written authorisation. The representative should produce authority
letter and his/ her valid identity proof while tendering the notes.
15. Can I withdraw from ATM?
It may take a while for the banks to recalibrate their ATMs. Once the ATMs
are functional, you can withdraw from ATMs upto a maximum of ₹ 2,000/-
per card per day upto November 18, 2016. The limit will be raised to ₹
4000/- per day per card from November 19, 2016 onwards.
16. Can I withdraw cash against cheque?
Yes, you can withdraw cash against withdrawal slip or cheque subject to
ceiling of ₹ 10,000/- in a day within an overall limit of ₹ 20,000/- in a week
(including withdrawals from ATMs) upto November 24, 2016, after which
these limits shall be reviewed.
17. Can I deposit Specified Bank Notes through ATMs, Cash Deposit
Machine or cash Recycler?
Yes, Specified Bank Notes can be deposited in Cash Deposits machines /

Cash Recyclers.

18. Can I make use of electronic (NEFT/RTGS /IMPS/ Internet Banking /

Mobile banking etc.) mode?
You can use NEFT/RTGS/IMPS/Internet Banking/Mobile Banking or any

other electronic/ non-cash mode of payment
19. How much time do I have to exchange the notes?
The scheme closes on December 30, 2016. The Specified banknotes can be
exchanged at branches of commercial banks, Regional Rural Banks, Urban
Cooperative banks, State Cooperative Banks and RBI till December 30, 2016.
For those who are unable to exchange their Specified Bank Notes on or before
December 30, 2016, an opportunity will be given to them to do so at specified
offices of the RBI, along with necessary documentation as may be specified by
the Reserve Bank of India.
20. I am right now not in India, what should I do?
If you have Specified banknotes in India, you may authorise in writing enabling
another person in India to deposit the notes into your bank account. The person
so authorised has to come to the bank branch with the Specified banknotes, the
authority letter given by you and a valid identity proof (Valid Identity proof is
any of the following: Aadhaar Card, Driving License, Voter ID Card, Pass Port,
NREGA Card, PAN Card, Identity Card Issued by Government Department,
Public Sector Unit to its Staff)
21. I am an NRI and hold NRO account, can the exchange value be
deposited in my account?
Yes, you can deposit the Specified banknotes to your NRO account.
22. I am a foreign tourist, I have these notes. What should I do?
You can purchase foreign exchange equivalent to ₹ 5000 using these Specified
Bank Notes at airport exchange counters within 72 hours after the notification,
provided you present proof of purchasing the Specified Bank Notes.
23. I have emergency needs of cash (hospitalisation, travel, lifesaving

medicines) then what I should do?
You can use the Specified Bank Notes for paying for your hospitalisation

charges at government hospitals, for purchasing bus tickets at government bus

stands for travel by state government or state PSU buses, train tickets at railway
stations, and air tickets at airports, within 72 hours after the notification.
24. What is proof of identity?
Valid Identity proof is any of the following: Aadhaar Card, Driving License,
Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by
Government Department, Public Sector Unit to its Staff.
25. Where can I get more information on this scheme?
Further information is available at our website (www.rbi.org.in) and GoI

website
26. If I have a problem, whom should I approach?
You may approach the control room of RBI by email or on Telephone Nos 022
22602201/022 22602944

Annex-2(d)
Request Slip for exchange of Old High Denomination Bank

Notes in denominations of ₹ 500/- and ₹ 1000/-
Name of the Bank

Branch:
Name of the Tenderer
(In capital Letters)

Identity Proof Original to Aadhaar Card, Driving License, Voter ID Card,
be shown at the counter Pass Port, NREGA Card, PAN Card,
(Tick the one applicable) Identity Card Issued by Government

Department, Public Sector Unit to its Staff,
Identification Number
(Number mentioned in
the Identity Proof
submitted)
Details of Old High Denomination No of Pieces Value
Denomination Bank
₹ 500
Notes submitted for
exchange ₹ 1000
TOTAL
Total value in words:
Signature of Tenderer
Place:
Date:

Annex-2(e)
Format for reporting daily exchange of withdrawn bank notes in the

denominations of ₹500/- and ₹ 1000/- to the Controlling Office
Name of the Bank:
Name of the Branch:
IFSC Code:
The Bank Notes exchanged at the branch on are as

under:
₹ 500
₹ 1000
TOTAL
Name and Designation of the Branch In-charge
Signature of the Branch In-charge
Date:
Place:

Annex-2(f)
Format for reporting to RBI Central Office (Email) on a daily basis
the exchange of withdrawn banknotes in the denominations of ` 500/-
and ` 1000/- at the branches of the bank
Name of the Bank:
The withdrawn banknotes exchanged on (Date) are as under:

₹ 500
₹ 1000
TOTAL
Name and Designation of the Reporting Officer
Signature of the Reporting Officer
Date:
Place:


Annexure 3: Banknotes in Circulation
Banknotes in Circulation
Denomination Value
(₹) (₹ billion)
Mar-15 Mar-16 Mar-17 Mar-18
1 5 6 7 7
2 and 5 46 45 45 44
(0.3) (0.3) (0.3) (0.2)
10 303 320 369 307
(2.1) (1.9) (2.8) (1.7)
20 87 98 203 200
(0.6) (0.6) (1.5) (1.1)
50 174 194 356 367
(1.2) (1.2) (2.7) (2)
100 1,503 1,578 2,528 2,222
(10.5) (9.6) (19.3) (12.3)
200 371
(2.1)
500 6,564 7,854 2,941 7,734
(46) (47.8) (22.5) (42.9)
1,000 5,612 6,326 89 66
(39.3) (38.6) (0.7) (0.4)
2,000 - - 6,571 6726
- - (50.2) (37.3)
Total 14,289 16,415 13,102 18,037
Note: Figures in parentheses represent the percentage share in total volume/value.
Source: Reserve Bank of India website


Questionnaires
Annex 4: Questionnaires
EVALUATON OF EFFECTS OF DEMONETIZATION ON

SMALL SCALE INDUSTRIES IN KARNATAKA
Schedule
1. Location of SSI unit: 1.1. District
1.2. Taluk
1.3. City/Town
2. Name of SSI unit:
3. Year of Establishment:
4. Name of owner/owners:
5. Types of product: 5.1: Main Product

5.2: Bye product
6. Marketing Area: 6.1: Entire Karnataka

6.2: Few Districts (mention districts)
6.3. Outside Karnataka (mention states)
7. Quantity of production in last few years:
Name of product
Year Main product Bye product
2010 -11
2011 -12
2012 -13
2013 -14
2014 -15
2015 – 16
8. Quantity sold in last few years:

Main product Bye product

Year Quantity Price Quantity Price
2010 -11
2011 -12
2012 -13
2013 -14
2014 -15
2015 – 16
9. Number of workers in last few years:

Permanent Total Temporary Total Daily wage Total
salary salary salary paid
paid paid
Year
2010 -11
2011 -12
2012 -13
2013 -14
2014 -15
2015 – 16
10. Cost of production:

Details
Materials cost
Labour cost
Advertisement cost
Others
1
2
3
11. Investment on SSI unit
Expenditure on buildings

Questionnaires
Expenditure on machinery
Expenditure on technology
Expenditure on obtaining facilities like electricity, water supply, waste disposal etc.
Effects of Demonetization on SSIs

12. How did you come to know about demonetization?
13. What type of difficulties you faced during the initial days of demonetization?
14. How did you manage cash inadequacy during the initial days of demonetization?
15. How was your interaction with banks during initial days of demonetization?
16. What is the impact of demonetization on production?

Decreased/ Increased/ No change

17. Give details of production for the following months:

Month Main product Bye product
April 2016
May
June
July
August
September
October
November (till 8th)
November (8th onwards)
December
January 2017
February
March
April
May
18. What is the impact of demonetization on sales of your product?
Decreased/Increased/No change
19. Give details of sales for the following months:

Month Main product Price Bye product Price
April 2016
May
June
July
August
September
October

Questionnaires
November (till 8th)

November (8th
onwards)
December
January 2017
February
March
April
May
20. Give details of returns / receipts for the following months:

Month Returns
April 2016
May
June
July
August
September
October
November (till 8th)
November (8th
onwards)
December
January 2017
February
March
April
May
21. What is the impact of demonetization on employment in your unit?
Decreased/ Increased/ No change

22. How did you manage the difficulties of demonetization on production?

Type of difficulty resolved by
1.
2.
3.
23. How did you manage the impacts on sales?

Type of impact resolved by
1.
2.
3.
24. How did you manage the impacts on workers?

Type of impact resolved by
1.
2.
3.
25. What is your opinion on demonetization and its effects on SSIs?

Questionnaires
EVALUATION OF EFFECTS OF DEMONETIZATION ON SMALL SCALE

INDUSTRIES IN KARNATAKA
Karnataka Evaluation Authority Website: kea.karnataka.gov.in

#542, 5th Floor, 2nd Gate Contact No: 080 2203 2561
Dr. B.R Ambedkar Veedhi Email Id: keagok@karnataka.gov.in
M.S. Building
Bengaluru – 560 001

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GOVERNMENT OF KARNATAKA

EVALUATION OF EFFECTS OF DEMONETIZATION ON

KARNATAKA EVALUATION AUTHORITY

HYDERABAD KARNATAKA CENTER FOR ADVANCED LEARNING

KARNATAKA EVALUATION AUTHORITY

Typeset & Printed by

WE, THE PEOPLE OF INDIA,

JUSTICE, social, economic and political;

EQUALITYof status and of opportunity;

FRATERNITYassuring the dignity of the

IN OUR CONSTITUENT ASSEMBLY

HEREBY ADOPT, ENACT AND GIVE TO

The “Evaluation of Effects of Demonetization on Small Scale Industries in Karnataka”

The Commissioner of Karnataka State Small Scale Industries Association, (KASSIA)

Sl. No. Title Page No.

Table Title Page No.

Graph No Title Page No.

Money is backbone of transactions in modern economies, playing roles

Demonetization is a monetary process of stripping a currency unit of its

Review of literature illustrated limited number of studies on small scale

Karnataka Evaluation Authority | 1

Karnataka is an important industrial state promoting high technology

The study observed that Karnataka has 13959 factories, including

2 | Karnataka Evaluation Authority

Demonetization was an unexpected move by the government as opined

Large proportion of entrepreneurs (22 per cent) faced problems while

Demonetization process adversely affected production of SSIs (25 per

Karnataka Evaluation Authority | 3

On employment side demonetization impacted adversely on temporary

Demonetization affected private money lenders and this in turn affected

Findings of this short term study on impacts of demonetization on SSIs

Demonetization has promoted use of electronic payment system, hence

4 | Karnataka Evaluation Authority

Use of electronic methods of payments has increased finance related

Growth of industries need to be promoted in other districts also to create

SSIs should be encouraged in all districts to meet demands of these

Inadequate financial support was a major reason for the difficulties of

Any policy change will immediately impact on vulnerable groups like

Karnataka Evaluation Authority | 5

6 | Karnataka Evaluation Authority

Money plays significant role particularly in economic life of human

Money is backbone of modern economies which are based on expanded

Karnataka Evaluation Authority | 7

Government of India announced a major change in monetary policy,

Major objectives behind this move as specified by the government were:

In the background of above objectives Government of India ceased Rs.

8 | Karnataka Evaluation Authority

Demonetization is not new in India as Indian Governments had

1.1. Definition of Demonetization

Demonetization is a monetary policy where a certain currency unit ceases

Karnataka Evaluation Authority | 9

Generally, demonetization is implemented for various factors such as

1.2. Demonetization across Countries

Demonetization as a monetary policy has been implemented by many

10 | Karnataka Evaluation Authority

counterfeit money, create common currency, mitigate higher value money,

1.3. Demonetization in India

Central Government announced demonetization in India on November 8, 2016

Initial phase of recent demonetization saw lot of confusions as the cash

Karnataka Evaluation Authority | 11