Impact of Demonetization on Employment in India: Issues and Challenges of Labour Market

Abstract

Demonetization is a conventional practice in monetary policy to embark upon black money. However, it was meant to be suddenly implemented. Long-ago, demonetization has taken place twice but it failed because the idea is to tackle the black money existing in circulation. This wasn’t for tackling corruption that’s what Government is not saying that 100% corruption will be tackled and also if announcement and time would have been given, this step might not have been successful in controlling black money and counterfeit currency in circulation coming from Pakistan, Nepal or other countries. Demonetization is a course of extraction of an exacting form of currency from circulation. The existing form of money has chosen from transmission and retired, to be put back with new notes or coins. The newest demonetization measures taken by the Indian Government on November 8th 2016, in an attempt to hold back corruption and black money has resulted in a massive amount of involuntary consequences. While the key objective following this budge  is commendable, the planning and implementation of the scheme left much to be required from a policy point of view. This step has caused rolling impact throughout the economy, departing the most sectors reasonably crippled owing to the unanticipated cash crisis. The labour market in India has been witnessing numerous uncertainties including the problem of world recession, and growing ‘automation’ particularly in the manufacturing sector. More precisely, in the last one and a half decade, India has emerged a global power in terms of the development or diffusion of new technology in the form of ICT. ICT intensity, defined as the ratio of ICT investment to non ICT investment, has increased significantly across industries led to ‘automation’ in most production (and distribution). Its impact on productivity led growth, and direct employment is well documented. However, its negative employment impact, particularly in the ICT using manufacturing sector has largely been ignored. So, in a situation, when the debate, whether the net employment impact of ICT on the economy as a whole is positive, is still un-conclusive; any major policy change like ‘demonetization’ is likely to make the employment scenario further volatile by causing uncertainties to rise in labour market, mainly the informal employment.