Impact of Demonetization on Indian economy through lens of domestic air traffic
Growth of the
Economy in general measured by the Gross Domestic product (GDP). But there are
many indicators which act as proxy to gauge the economic growth. Satellite data
of the night light use to measure the growth of economy. Likewise
transportation sector is also a good indicator and proxy to GDP to measure the
economic changes. This paper studied the impact of the demonetization on Indian
economy through the air traffic data. The results show the massive slump air
traffic in post demonetization period on routes having commercial importance
and lesser impact on the tourism routes.
Introduction:-
A 2012 research paper by
the Japan-based think-tank IDE-JETRO used night-lights data to show that most
economic activity is concentrated in regions surrounding the capital Yangon of
Myanmar. [1]. Likewise, the infrastructure and especially transport
infrastructure is closely linked to economic growth. Li Keqiang, A High rank official of china
suggested an alternative indicator of measure the economic changes which is
based on the data o the railway cargo volume, electricity consumption and loans disbursed by banks. [2]
In India, infrastructure's link to the
economic growth is well recognised. Economic survey of the 2020 noted that -
"Investment in Infrastructure is necessary for growth. To achieve the GDP
of $5 trillion by 2024-25, India needs to spend about $1.4 trillion (`100 lakh
crore) over these years on infrastructure." [3]
Transport demand and supply is closely
linked to the Economy. In fact, Infrastructure acts as fuel to the growth
engine of the economy. When economy grows more, there is more demand of the
coal transport between Jharkhand to Maharashtra. When Economy slumps, ait trips
of businessmen between Delhi and Mumbai also reduce.
In This paper, I study the change took
place in the air traffic after demonetization.
Data Collection:-
Director
General of Civil Aviation (DGCA) published the month wise data on their
website. [4] I collected data from there. Following is an Example of the data
collected.
Number of
Passengers travelled Between cities
|
|||
Month
|
Ahm-Mumbai
|
Mumbai-Ahm
|
Ahmedabad-Goa
|
Jul-15
|
77364
|
76263
|
4415
|
Aug-15
|
84453
|
79857
|
4395
|
Sep-15
|
84257
|
82079
|
4498
|
Oct-15
|
72612
|
75662
|
4785
|
Nov-15
|
89493
|
92810
|
8940
|
Dec-15
|
100086
|
101057
|
9834
|
Methodology:-
Selected 10 Routes, 5 having
commercial importance and 5 having the Tourist attraction. Choose routes in
such way that include at least 1 route from each region of the country.
Tourism and Commercial places have some
particular hike/dip in demand during days or weeks, so, analysed the data on
basis of the month.
Demonetization was imposed in the month
of the November 2016. Therefore chose 120 days period pre demonetization and 60
days period post demonetization to find the changes in domestic air traffic.
Chose July to January for the year 2015 and 2016 for the analysis.
Literature Review:-
Liisa Ecola and Martin Wachs, The RAND
Corporation in study "Exploring the Relationship between Travel Demand and
Economic Growth" (2012) shows that how the transport demand and the
economic growth is closely linked. They argued that, vehicle miles of travel
(VMT) is a better indicator than GDP to measure the economic growth.
Satoru KUMAGAI, Souknilanh KEOLA and
Toshihiro KUDO in research paper "Policy Review on Myanmar Economy"
(2012) estimated the GDP of the various region of the Myanmar by using the
light illumines satellite pictures at night.
Elena Cigu, Daniela Tatiana, Agheorghiesei Anca, Florentina Gavrilut, and Elena Toader in study "
Transport Infrastructure Development, Public Performance and Long-Run Economic
Growth: A Case Study for the Eu-28 Countries" (2018) Examined the link
between the transportation and economy.
Study Routes:-
Routes having commercial importance (
Sky blue colour)
- Ahmedabad to Mumbai
- Mumbai to Ahmedabad
- Surat to Delhi
- Kolkata to Chennai
- Mumbai to Delhi
Routes having tourist importance ( Grey
Colour)
- Ahmedabad to Goa
- Delhi to Udaipur
- Bangalore to Varanasi
- Mumbai to Goa
- Mumbai to Jammu
Calculations:-
Demonetization
was imposed in the November 2016. To gauge the trend of the domestic air
traffic, I selected the period of the month of July.
I calculated
the at which rate domestic air traffic was growing/receding for the month of
the July to January which is 120 days pre demonetization and 60 days post
monetization period.
Here is the calculation of the Change in the domestic
air traffic in year 2016 inrespect to the year 2015 for the months of July to
January.
Findings :-
> On the commercial route, there is a massive dip in the air traffic. In 3 out of 5 routes , the Growth went to negative. i.e Mumbai - Ahmedabad growth rate in October 2016 was 7% which reduced to -5% in November.
> On Tourist route, the Growth remained positive but the growth rate
decreases significantly. i.e Delhi - Udaipur air traffic was growing on rate of more 80% which reduced to 25%.
> Though the tourist route regained the growth momentum in short time, the
Commercial route struggle for long time to regain growth.
References :-
[1] Satoru
KUMAGAI, Souknilanh KEOLA and Toshihiro "Policy Review on Myanmar
Economy" (2012)
[2] The
Economist "China's economy - Keqiang ker-ching" (2010)
[3] Economic
Survey of India (2020)
[4] DGCA website
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