Impact of demonetization on skill development and income generation: a case study of the industrial cluster of Faridabad, India

Anita Prasad and Anandajit Goswami
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Anita Prasad: Manav Rachna International Institute of Research and Studies,Faridabad,Haryana,India
Anandajit Goswami: Manav Rachna International Institute of Research and Studies,Faridabad,Haryana,India

Romanian Journal of Economics, 2023, vol. 57, issue 2(66), 99-113

Abstract: Objective: Demonetization was one of the macroeconomic shocks that occurred in India on 8th November 2016, leading to an impact on liquidity for informal laborers. The income of informal laborers declined, which increased poverty and inequality among the informal workers. Therefore, the study aims to comprehend how demonetization affected the informal labor segment of the Faridabad district of Haryana. Furthermore, skill development in this setting is crucial in addressing poverty because it increases laborerb s b employabilityb , b productivityb , and promotes b equitable growth.b Thus, another objective of the study is to understand how the laborerb s productivity and employability are related to the enhancement of the skill of informal workers, which can thereafter address the SDGs 1 (Zero Poverty), 5 (Gender Equality), 8 (Economic Growth & Decent Work), 10 (Zero Inequality). Method: Regression analysis has been used to assess the causal relationship between the money supply, income creation, and gross domestic savings based on secondary data. This was supported by primary data collected through surveys from informal laborers in a particular Faridabad industrial cluster. Further, the descriptive research (ANOVA) and econometric model will show how skill development among informal workers promotes employability and productivity, and primary data will show how gender, education, and skill affect productivity, respectively. This may further reduce the poverty levels complemented by a national, state-level policy analysis. Results: The study revealed a decrease in average income (from INR 10,340 to INR 7,075) and savings (from INR 1,330 to INR -2,092) of informal workers after demonetization. The study also shows that male salaries improve when they receive formal skill development training, that is, by INR 1096.944 (INR 11429) from INR 10332. On the other hand, the average income of female informal workers who have informal training and no primary education comes to be at INR 10332.79. Originality: The research is an original mixed-method approach to determine the intuitive and positive links between changes in the Gross Domestic Product (GDP), Money Supply (M3), and household Gross Domestic Savings. It is further supported by primary data that show how demonetization affected informal workers' savings and the effect of skill on their earnings (a proxy variable for labor productivity).

Keywords: demonetization; informal sector; savings; skill; formal training (search for similar items in EconPapers)
JEL-codes: C01 J21 J46 (search for similar items in EconPapers)
Date: 2023
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