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Demonetisation Eng Asl

The document summarizes the demonetization that occurred in India in 2016 when the government demonetized Rs. 500 and Rs. 1000 banknotes. It announced new banknotes of Rs. 500 and Rs. 2000 would replace the demonetized notes. The goal was to curb black money, reduce counterfeiting and fight terrorism by making existing cash unusable. However, it led to cash shortages as people queued to exchange notes. While some supported it, many criticized it as poorly planned and unfair due to its adverse impacts on farmers, small businesses and GDP growth in the short term. Debates continue around its costs and whether it achieved its aims.

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Tanisha Gupta
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68 views

Demonetisation Eng Asl

The document summarizes the demonetization that occurred in India in 2016 when the government demonetized Rs. 500 and Rs. 1000 banknotes. It announced new banknotes of Rs. 500 and Rs. 2000 would replace the demonetized notes. The goal was to curb black money, reduce counterfeiting and fight terrorism by making existing cash unusable. However, it led to cash shortages as people queued to exchange notes. While some supported it, many criticized it as poorly planned and unfair due to its adverse impacts on farmers, small businesses and GDP growth in the short term. Debates continue around its costs and whether it achieved its aims.

Uploaded by

Tanisha Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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On 8 November 2016, the 

Government of India announced the demonetisation of


all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series. It also announced the
issuance of new ₹500 and ₹2,000 banknotes in exchange for the demonetised banknotes.
Prime Minister Narendra Modi claimed that the action would curtail the shadow economy
and reduce the use of illicit and counterfeit cash to fund illegal activity and terrorism.
The announcement of demonetisation was followed by prolonged cash shortages in the
weeks that followed. People seeking to exchange their banknotes had to stand in lengthy
queues, and several deaths were linked to the rush to exchange cash. initially, the move
received support from several bankers as well as from some international commentators. The
move was also criticised as poorly planned and unfair, and was met with protests, litigation,
and strikes against the government in several places across India. Debates also took place
concerning the move in both houses of Parliament.
Demonetization was done to help India to become corruption-free as it will be difficult now
to keep the unaccounted cash. It will help the government to track the black money and the
unaccounted cash will now flow no more. Money laundering will eventually come to halt as
the activity can easily be tracked and the money can be seized by the authorities. It also
aimed to stop the running of parallel economy due to circulation of fake currency as the
banning of Rs.500 and Rs. 1000 notes will eliminate their circulation.
The sudden announcement has made adverse impact on business and economy. Instead of a
growing economy India has become a standstill and no growth economy. A fall of 2-3% in
the GDP growth was recorded coming year. India is an agriculture based economy. Due to
the cash crunch, the farmers especially small and marginal who largely depend on cash to
buy seeds, fertilizers and to pay for sowing, borrowing water for irrigation and for other
related agriculture equipments remained worst affected and could not complete the crop
related activity. Since small branches of the banks were also not supplied with adequate cash
within time of sowing season of the crop, farmers could not get their crop loans disbursed.
Demonetization is the 2 way sword in regard to incurring the public expenditure. On the one
hand huge cost is to be incurred on printing the new currency and on the other hand
managing the lakhs of crores of old currency volume has also become a big expenditure
incurring item. Many Economists are of the view that Rs.2000 currency note will be much
easier to hide and can be used to store black money in shorter space. Entire opposition has
stood against demonetization and has called this decision a draconian law.

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