INTRODUCTION In the current times, the topic of demonetization has been gaining a lot of momentum. For those who do not know, demonetization is the process in which the currency is no longer considered as a legal tender by the law of that country. So, it is like a country banning its own currency; it could be done for a number of reasons, such as- to introduce a new currency with the same value, or to fight against black money and corruption. A lot is being said about the benefits and demerits of the present demonetization act in India. 'Demonetization' Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change of national currency: The current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins. Sometimes, a country completely replaces the old currency with new currency. The opposite of demonetization is remonetization, in which a form of payment is restored as legal tender. There are multiple reasons why nations demonetize their local units of currency: to combat inflation to combat corruption and crime (counterfeiting, tax evasion) to discourage a cash-dependent economy to facilitate trade Examples of Demonetization The Coinage Act of 1873 demonetized silver as the legal tender of the United States, in favor of fully adopting the gold standard. Several coins, including two-cent piece, three-cent piece, and half dime were discontinued. The withdrawal of silver from the economy resulted in a contraction of the money supply, which subsequently led to a five-year economic depression throughout the country. In response to the dire situation and pressure from farmers and silver miners and refiners, the Bland-Allison Act remonetized silver as legal tender in 1878. An example of demonetization for trade purposes occurred when the nations of the European Union officially began to use the euro as their everyday currencies in 2002. When the physical euro bills and coins were introduced, the old national currencies, such as the German mark, the French franc and the Italian lira were demonetized. However, these varied currencies remained convertible into Euros at fixed exchange rates for a while to assure a smooth transition. In 2015, the Zimbabwean government demonetized its dollar as a way to combat the country’s hyperinflation, which was recorded at 231,000,000%. The three-month process involved expunging the Zimbabwean dollar from the country’s financial system a solidifying the U.S. dollar, the Botswana pula and the South African rand as the country’s legal tender in a bid to stabilize the economy. India's Demonetization In 2016, the Indian government decided to demonetize the 500- and 1000- rupee notes, the two biggest denominations in its currency system; these notes accounted for 86% of the country’s circulating cash. With little warning, India's Prime Minister Narendra Modi announced to the citizenry on Nov. 8 that those notes were worthless, effective immediately – and they had until the end of the year to deposit or exchange them for newly introduced 2000 rupee and 500 rupee bills. Chaos ensued in the cash-dependent economy (some 78% of all Indian customer transactions are in cash), as long, snaking lines formed outside ATMs and banks, which had to shut down for a day. The new rupee notes have different specifications, including size and thickness, requiring re-calibration of ATMs: only 60% of the country’s 200,000 ATMs were operational. Even those dispensing bills of lower denominations faced shortages. The government’s restriction on daily withdrawal amounts added to the misery, though a waiver on transaction fees did help a bit. Small businesses and households struggled to find cash and reports of daily wage workers not receiving their dues surfaced. The rupee fell sharply against the dollar (see chart). The government’s goal (and rationale for the abrupt announcement) was to combat India's thriving underground economy on several fronts: eradicate counterfeit currency, fight tax evasion (only 1% of the population pays taxes), eliminate black money gotten from money laundering and terrorist-financing activities, and to promote a cashless economy. Individuals and entities with huge sums of black money gotten from parallel cash systems were forced to take their large-denomination notes to a bank, which was by law required to acquire tax information on them. If the owner could not provide proof of making any tax payments on the cash, a penalty of 200% of the owed amount was imposed. Alternative Funds Soon after the announcement, people rushed to buy gold, a demand that drove prices up, in some cases even to a 60% premium, prompting the tax authorities to conduct surveys, according to the Business Standard newspaper. The government emphasized the need to furnish PAN (Indian Permanent Account Number) card details on purchases for accountability purposes, and many jewellery shops that were flouting the norms came under crackdowns. Simultaneously, rumours of a gold ban started to float, which led to agencies ramping up the volume of gold imports – to around 100 metric tons during November, the highest since 2015, as reported by Reuters. Many Indians switched to alternative payment avenues – a big deal in a country of 1.2 billion with only 25.9 million credit cards and 697 million ATM cards as of July 2016. The biggest gainers were mobile wallet companies that offer ease of transactions through a large network of partners. Alibaba (NYSE:BABA)-backed Paytm saw a sevenfold increase in overall traffic and a 10-fold jump in money added to Paytm accounts. It also saw the number of transactions double to five million a day. App downloads for Paytm increased by 300%. Paytm rival MobiKwik also saw its app downloads quadruple and a 20-fold increase in money added to the wallets, MobiKwik Founder & CEO Bipin Preet Singh, told CNBC-TV18 on November 13. Prepaid cash cards were another option that customers found useful, and that meant good news for companies like ItzCash. Other alternatives include mobile payments systems linked to e-commerce businesses like Ola Money, FreeCharge, Flipkart Wallet. Ola Money, the payment portal for popular transportation app Ola Cabs, reported a 1500% jump in money added to the accounts in less than four hours. Interest in Bitcoin also spiked: Sandeep Geonka, co-founder of Zebpay, told Investopedia that his bitcoin exchange was now adding about 50,000 new users per month. "We are seeing an increased demand for bitcoin and India clearly has shortage of supply, making the demand and lack of liquidity push up prices of bitcoin as compared to global exchanges,” said Coinsecure CEO Mohit Kalra. The virtual currency was trading at INR 55,735 in India in November (about $836), compared INR 47,725 (about $712) (Coindesk) elsewhere. Long-Term Effects Over 3 trillion rupees, or over $44 billion in old currency, was deposited with Indian banks in just the first week after the demonetization. There was concern that the uncertainty and short-term liquidity squeeze would take some momentum off the Indian economy, the fastest-growing in the world; in particular, sectors like real estate, notorious as a harbor for cash dealings and black money, were expected to take a hit, with "luxury property prices dipping by as much as 25-30%,” said Ashwinder Raj Singh, Ceo of Residential Services, JLL India. But experts believed any slowdown would only be short-lived once the systems adjusted to the new normal, especially if the government heeded calls to lower interest rates by groups like the Federation of Indian Chambers of Commerce and Industry (FICCI). Credit rating agency India Ratings & Research maintained its GDP growth forecast for India at 7.8% for FY17, albeit with a downward bias. INFLUENCE OF DEMONETIZATION IN THE PHARMA SECTOR OF INDIA It is very well known that cash is used quite a lot in the Pharma business, particularly as bribe. Big Pharma companies make use of cash transactions in order to get a hold of the market. Initially, it was difficult for the small Pharma companies and the entrepreneurs to stand a chance against the big players. But, after the demonetization act has come into effect, the big companies are struggling to maintain the flow of cash for bribing their clients. As a result of it, the entrepreneurs or new players have found a new ground for competition. Demonetization has certainly provided a lot of advantage to the new Pharma companies. Another way in which demonetization is going to affect Pharma sector is related to the rates of medicines. Since most of the transactions now are going to take place via online and banks, therefore the amount of profit made cannot be kept hidden by the Pharma companies and stores. So, it will certainly discourage the Pharma stores to charge more from the customers. In addition, demonetization will also bring in the habit of maintaining legal invoices as well as bills. We all know that how Pharma companies and distributors try to keep the doctors happy by offering benefits on regular basis, usually in the form of gifts, tours, etc. With the inception of demonetization, this habit of influencing the doctors for generating prescription will no longer is going to flourish. So, it will certainly provide the smaller companies to compete in the market in a better way. Better regulation of the Pharma market has also become possible with the effect of demonetization. As more fluidity will take place in banking transactions, the government will be able to have a better regulation over the pharmaceutical market. This will give rise to a less corrupted Pharma market. At the same time, with the implementation of new rules and regulations, the prices of expensive medicines will also slash down, which in turn will benefit the common man. So, there are tons of benefits associated with the demonetization of the Indian Pharma sector. With the passage of time, more smoothness will be brought into it. Overall, it will be advantageous for the customers as well as for the new Pharma companies. The pharmaceuticals Industry is a blooming industry which is estimated 2, 40, 000 crore. So, one can imagine the money building power of this domain which invites high rate of corruption. With the happiness of New Year, you will be eager to know what will be the effect of Demonetization at Pharmaceutical Sector in 2017 and coming years. Our Prime Minister Narendra Modi Ji on November 8, 2016, declared demonetization of Rs 500 & Rs 1000. This left the business industry to loads of hazels. The step was taken to eliminate corruption lead to a trail of effect on this medicine supplying domain. Though this industry is like bulletproof when it comes to economic condition, a huge effect was witnessed. In this article by Sunwin Healthcare, we will tell you what will the effect of Demonetization at Pharmaceutical Sector in coming years. The Indian Pharmaceuticals sector is a composition of many. It includes companies, doctors, chemists, distributors and much more. The industry saw a drop in sales by 4% to 5% week by week since demonetization in November’ 2016. This made the lowest sale in the year. The demonetization and ban of Rs 500 & Rs 1000 made Pharma products costly. This affected the sales of chemists and pharmacists all over the nation. The effect resulted in 30% fall in house prices. The frequent fall from 6% to 8% in stock exchange market also saw the effect in the pharmaceuticals market. The third contract manufacturing Pharma business met with low production due to failure to meet the cash transactions. Effect Of Demonetization On Pharma Industry & Future Job Perspective The ban of highest domination currency Rs 500 & Rs 1000 left the whole country mourn as the country went cashless when it came to transactions. The biggest witnesses were the lines for depositing old currency to the bank to the difficulty in receiving new ones. The pharma industry consists of various elements which are as follows: Pharma Company Distributor Stockiest C&F (Carrying & Forwarding Agent) Retailer/Chemist/Pharmacies Consumer Doctor The cash transaction is a widely accepted mode of transfer everywhere. The individuals who have initiated the business or were going to start one went to face a lot of issues. From prescription to every commission made as a bribe & black money, demonetization affected the pharma journey a lot. If you have illegal money then business will be difficult whereas legal money will win the race. The Pharma Jobs like medical representatives, pharmacists etc. were also affected. As per 2017 is expected to be a bright year of those seeking for jobs in the pharma industry. The Pharma Vision 2020 is expected to rise to about 12% by next three years. The first half may seem a surge but is expected to smooth out sooner. Total Sales Value Trend -Total sales remain sluggish compared to same period of Oct. The trough & peak of 1st Nov & 8th Nov could average to 51 Cr, so 48.5 and 47.9 are marginal drop from average of week ending 1st Nov & 8th Nov . The monthly impact could be 4-5% drop in sales, is this trend continues in last week of Nov. From 25th Nov old Rs. 1000 notes are not accepted at Chemist counters – which may have a further negative impact. Acute Therapy Trend : Acute therapy has been hugely impacted. Even in week 1 – the impact was severe and sales were lower than the Diwali week, which is generally annually the lowest sales. The trend continued in Week 2 – where acute sales remain subdued. Companies having high Acute weightage will experience a sharper dip and sales could be down around 20% in Nov compared to Oct. Chronic Therapy Trend : Chronic therapy has been the biggest beneficiary – which clearly shows some chronic patients have used old notes to prepone their medicine supply for 2-3 months. Week 1 & 2 of demonetization has shown significantly higher sales than corresponding period in Oct as well as much higher than the Diwali week trough of 14.1 Cr. Overall chronic therapy may gain 10-15% additional sales in Nov. Sub-Chronic Therapy Trend: Sub-Chronic includes many Gastro Products, Vitamins, Osteoporosis drugs, Osteoarthritis medications etc. Sub-Chronic is the most stable and steady trend.The dip is marginal and higher than Diwali week. Week 2 is a marginal rise than week 1 of demonetization.There is no major change in Nov over Oct, likely for Sub-Chronic Inventory Days : Inventory Days remain high – overall and therapy wise. The extended credit period offered by several companies is helping .Acute with subdued sales, shows highest inventory days – around 45 .Chronic is having lowest inventory days – but a comfortable 34 days. No shortage of medicines likely in any part of the country. The decision of demonetization was a success or failure is still a debate. The Indian Pharmaceuticals is still determined to grow and reach the vision of 2020. What was the effect of the decision of the industry are as follows: A good downfall of medicine was witnessed. This will result in legal invoicing & billing habits. Prescribe for cash was replaced with ethical codes. This accounted more than 80% of doctors who write prescription against cash. Better control of drug administration on sale and purchase above Rs 20, 000 cash against the invoice. Blanking has better control over high transactions. Rules & regulation against illegal drug & medicines were closely watched by the Government.