Currency Demonetization: Essay by Mohaq Siddiqi, Queen Mary Univerisity of

London
november 11, 2016

By Mohaq Siddiqi (LLM with specialization in Energy & Natural Resources Law, Queen Mary Univerisity of London,
London)

“Corruption and hypocrisy ought not to be inevitable products of democracy, as they undoubtedly are today.” – Mahatma Gandhi

The latest initiative of the BJP government is the direct result of the injury caused to the Indian democracy and its individuals by the amount of corruption
taking place in India. Corruption is a menace to the society. The steps taken by the BJP government was much needed for a very long time to remove this
tumor which was killing the society.

This is not the first time that India has demonetized its currency. The same strategy was adopted by the Reserve Bank of India in 1946 by actually banning
the Rs 1,000 and Rs 10,000 notes to deal with the unaccounted money also known as the black money. After demonetizing the Rs 1,000 and Rs 10,000
notes there was introduction of Rs 5,000 notes in the year 1954 which didn’t stay for long in the market and was eventually demonetized again in 1978.

This initiative is going to be advantageous as the government is strictly aiming at creation of a barrier for those who have not disclosed their actual assets
and are using the money which actually belongs to the citizens of India to buy properties in countries where the laws are less strict. The individuals have
also been using their black money by creating shell companies and carrying transactions across various countries and institutions where the money was
initially injected through.

This initiative of the government to attack corruption will make it hard for those in possession of black money to use it. The aim of taking out Rs 500 and
Rs 1000 notes out of the circulation in the market is to reduce the amount of illegitimate money in the economy. According to the economist the notes
which have high value make it much easier for black money to move around the country.

This decision of government of demonetization would make it extremely difficult for the law breakers and the corrupted to carry out tax evasion, financial
crime, money laundering. When the high denomination notes will escape the economy the corrupt individuals and companies will have higher risk of
detection. Additionally for the big companies who are committing tax fraud and had been doing this for a long time, this would disrupt their business
models completely.

It will extend the capacities of the financial framework, which as of now does not stretch out the nation over, and the interim time period will likewise
observe numerous endeavors by those clutching undisclosed cash or black money to transform their money into legal tender. The application likewise
depends vigorously on Indian authorities truly handing over on the guarantee to make it simple for individuals to transform their old currency into smaller
denominations. After this, the administration plans to reintroduce a new Rs 500-category note, with constrained circulation.

The real issue which revolves around this is the implementation process. It in itself is a difficult task. India being one of the largest developing countries
has a very slow democratic system. Policy making is half success unless its implementation is in effect. In a country where only 3%(approximately) of its
population is tax payer this will further lower the burden on the government and those who were bearing the tax burden due to inefficiency in the
implementation of tax policy.

But in the instant case to make this demonetization successful Narendra Modi & his government is planning to carry out massive operation over the next
few months , as millions of Indian citizen would make an attempt to exchange their old notes.

The government would ensure that the citizens of India are not troubled while in the process for changing their currency to the new one. This would surely
give a headache to public authorities as this could lead to increase in the burden on the public officers and could even require more employees to carry out
the process related work throughout India.

This step would send some clear signals to those in possession of black money that the new government won’t let them sit comfortably and they can’t run
away from their liabilities now. The government earlier this year had given the ultimatum to those with possession of black money and they were already
given an opportunity to disclose their actual assets and they can keep fifty percent of it and the rest fifty percent would go to the government.

Earlier this year the government had recovered thousands of crores of black money which showed the impact of the new leadership on its democracy. After
this process of demonetization the Indian government has just confirmed that it won’t let corruption in any way to hamper it development and progress in
future.

It is an enormous move from a government that is getting the mid-way mark of Modi’s term and something of a chance ahead of elections in the state of
Uttar Pradesh and Punjab, where one might expect much cash to be flying around. It follows Modi’s financial inclusion scheme, an income declaration
scheme and a special investigation team aimed at cracking down on black money, and suggests an actual attempt to deliver on the black money promises
made in the BJP’s campaign.

This would further send out a good signal to investors who are or have been willing to invest in the Indian market for a very long time but were somewhere
uncertain about the security of their investment as they were aware of the corruption happening in India. This measure taken by the Modi government
would certainly lead to more foreign investment as the companies are willing to do business in economies which are least corrupt.

The success of this policy as of now cannot be scaled as it totally depends upon implementation process but what one can be sure about is that this step
would bring an huge amount of undisclosed assets into picture which could further be used by the government to fight against the main issues such as
poverty and lack of good healthcare system.
Demonetization of Currency - Merits and
Demerits
Demonetization of currency means discontinuity of the particular currency from circulation and replacing it with a new currency. In the current context it is the
banning of the 500 and 1000 denomination currency notes as a legal tender.

The government’s stated objective behind the demonetization policy are as follows; first, it is an attempt to make India corruption free. Second it is done to curb
black money, third to control escalating price rise, fourth to stop funds flow to illegal activity, fifth to make people accountable for every rupee they possess and pay
income tax return. Finally, it is an attempt to make a cashless society and create a Digital India.

There is a background to the current decision of demonetization of 500 and 1000 rupee notes. The government has taken few steps in this direction much before
its November 8, 2016 announcement.

As a first step the government had urged people to create bank accounts under Jan Dhan Yojana. They were asked to deposit all the money in their Jan Dhan
accounts and do their future transaction through banking methods only.

The second step that the government initiated was a tax declaration of the income and had given October 30, 2016 deadline for this purpose. Through this
method, the government was able to mop up a huge amount of undeclared income.

However, there were many who still hoarded the black money, and in order to tackle them; the government announced the demonetization of 500 and 1000
currency notes.

The demonetization policy is being seen as a financial reform in the country but this decision is fraught with its own merits and demerits.

Merits
The demonetization policy will help India to become corruption-free. Those indulging in taking bribe will refrain from corrupt practices as it will be hard for them to
keep their unaccounted cash.

This move will help the government to track the black money. Those individuals who have unaccounted cash are now required to show income and submit PAN for
any valid financial transactions. The government can get income tax return for the income on which tax has not been paid.

The move will stop funding to the unlawful activities that are thriving due to unaccounted cash flow. Banning high-value currency will rein in criminal activities like
terrorism etc.

The ban on high value currency will also curb the menace of money laundering. Now such activity can easily be tracked and income tax department can catch
such people who are in the business of money laundering.

This move will stop the circulation of fake currency. Most of the fake currency put in circulation is of the high value notes and the banning of 500 and 1000 notes
will eliminate the circulation of fake currency.

This move has generated interest among those people who had opened Jan Dhan accounts under the Prime Minister’s Jan Dhan Yojana. They can now deposit
their cash under this scheme and this money can be used for the developmental activity of the country.

The demonetization policy will force people to pay income tax returns. Most of the people who have been hiding their income are now forced to come forward to
declare their income and pay tax on the same.

Even though deposits up to Rs 2.5 lakh will not come under Income tax scrutiny, individuals are required to submit PAN for any deposit of above Rs 50,000 in
cash. This will help the income tax department to track individuals with high denominations currency.

The ultimate objective is to make India a cashless society. All the monetary transaction has to be through the banking methods and individuals have to be
accountable for each penny they possess. It is a giant step towards the dream of making a digital India. If these are the merits, there are demerits of this policy as
well.

Demerits
The announcement of the demonization of the currency has caused huge inconvenience to the people. They are running to the banks to exchange, deposit or
withdraw notes. The sudden announcement has made the situation become chaotic. Tempers are running high among the masses as there is a delay in the
circulation of new currency.

It has deeply affected business. Due to the cash crunch, the entire economy has been made to come to a standstill.

Many poor daily wage workers are left with no jobs and their daily income has stopped because employers are unable to pay their daily wage.

The government is finding it hard to implement this policy. It has to bear the cost of printing of the new currency notes. It is also finding it difficult to put new
currency into circulation. The 2000 rupees note is a burden on the people as no one likes to do transaction with such high value currency. Some critics think it will
only help people to use black money more easily in future.

Further, many people have clandestinely discarded the demonetized currency notes and this is a loss to the country’s economy.
 Conclusion
Economists are busy in listing out many more merits and demerit of this policy. The government is saying that there are only advantages of demonetization policy
and this will be seen in the long term. Former Prime Minister Manmohan Singh who is a noted economist, former RBI governor and former Finance Minister of the
country, dubs the demonetization move as an 'organized loot and legalized plunder'.

However, if we compare the merits verses demerits, it will be safe to conclude that the former outweighs the latter.

Even though there is suffering and agony among the masses right at the moment but the forecast is that its benefits will be seen in the long run.

The government is taking all the necessary steps and actions to meet the currency demand and soon the trial and tribulations of the people will be over with the
smooth flow of the new currency.

 Pros of Demonetization
o The menace of black money can be controlled to some extent
o Terror financing, using black money for illegal activities etc will all take a hit
o The counterfeit currencies which have an impact on the real economy, will be rooted out
o The mobilization of deposits in the banks will increase, which may lead to increased credit flow and lowering of lending rates
o The black money adds to the inconspicuous demand and hence the inflation to some extent will be under control
o The government is also aiming to raise its revenue collection (eg- by taxing exorbitant IT rates over certain deposits, the tax collection in other
forms will also increase etc)
o The real estate is one of the major sources of black money generation. With this move it is expected that the property market rates may bottom out
or moderate
o It’s a major step by the government towards forming a cashless economy
o The honest workers will be rewarded under such scenario
o The elections are usually associated with black money generation and circulation, with this scheme the funding of elections through nefarious ways
will be hit
o It is expected that with this move the Fiscal Deficit of the government may come down

 Cons of Demonetization
o For one all the black money is not stored in the form of cash only and secondly the measure takes care of result but not the cause-black money is
generated mainly because of corruption and tax evasion. This measure controls the usage of black money but cannot control the causes
o Sudden and huge demand for the new currencies
o Panic amongst the common man (already we have seen the case wherein people have looted fair price shop in MP, Cash Carrying companies
seeking higher insurance etc). already the panic has led to people hoarding currencies which has further reduced the liquidity in the market
o The small trade/shopkeepers are facing difficulties
o Black marketing of the new notes/currencies is on the rise
o The establishments such as banks, hospitals etc are under lot of stress
o Another area which is a cause of worry is the likely drop in the rural demand as the cash usage will become restricted. Apart from this the experts
are also expecting an impact on SME sector, agricultural production (the economy was expected to perform well as there was an expectation of a
good rabi crop after two bad monsoons but a prominent economist, Pronab Sen has said that demonetization is akin to third bad monsoon year as it
will have an impact on agricultural production, but the more dangerous situation is this having a spillover effect on to fertilizer, tractor sectors)

 Challenges
o The coverage of the banking sector-
 Only 27% of the villages have a bank within 5 Kms (as per Economic Survey 2015-16)
 In spite of recording breaking implementation of JDY, the banking penetration is low-on an average 46% in all the states (as per Economic
Survey 2015-16)
o Another challenge in implementing and eradicating black money would be presence of informal economy. It accounts for 45% of GDP and 80% of
employment hence this move may have a greater impact on informal economy
o Logistics and cost challenges of replacing all the Rs 500 and Rs 1000 notes – as per the RBI documents this measure would cost at least Rs 12000
crore as it has to replace over 2300 crore pieces of these currencies
o The decision to issue Rs 2000 denomination currency and withdrawal of Rs 500 and Rs 1000 currency will lead to huge challenge as most of the
day to day transactions in India are centered around Rs 500 note (more than 47% of the value of notes in circulation is in Rs 500 note form)
o The availability of Rs 500 and Rs 1000 notes will be the biggest challenge as both of them covered over 85% in terms of value of total currencies
issued
o The process has led to huge rush and long queues of the people in front of ATMs and as per the statement of finance minister the ATM
recalibration would take around 2 to 3 weeks
o As per data furnished by the Finance Ministry, Rs 17,50,000 crore worth of currency notes were in circulation in October-end, out of which over
85% per cent or Rs 14,50,000 crore is in the now defunct Rs 500 and Rs 1,000 notes. So far for the first four days the government has been able to
pump in Rs 50000 cr (on an average 12500 Cr). Going by these numbers it would take around 4 months to replace these notes as against the 50
days promised by the PM

 Worries
o The rural demand even after a good monsoon is unlikely to pick up and agriculture production is unlikely to achieve 3.5 to 4% GDP growth rate
o As per Prof Bhanumurthy (NIPFP) all the black money may not find its way to the banks hence GDP growth rate may come down by 1.1% (the
professor has also remarked that the money which was not there in the system is being pumped in and add to this if the online transactions are
promoted then the GDP growth may pick up rather than declining)
 o As per economist Pronab Sen this may lead to lowering of GDP by 0.2 to 0.3% and in extreme cases we may end up achieving 7% (targeted is 8%)

 The opportunists
The online service providers have up their ante when there is a shortage of currency notes, pushing their products/services by providing discounts, coupons,
credit etc. For example Paytm, which is the largest mobile wallet company, has said that it (since the ban kicked in)

 Has seen a 700% increase in overall traffic on the platform

 1000% growth in the value of money added to the Paytm accounts
 Average transaction value has increased by 200%
 Mobile app downloads have increased by 300%
 Has processed around 5 million transactions each on 12th and 13th (Saturday and Sunday respectively) of this month

 The future
There is no doubt that the coming months will be painful for the common man, small businesses, housewives etc as there will be some shortage of legal
tender/currency that will have an impact on them. Another rising issue will be that the demand for POS machines, Debit Cards which has to be resolved
lest the measures will become an obstacle rather than the solution.
If these measures are implemented efficiently then we can expect higher collection of taxes, higher investments in the market, price corrections,
improvement of India in some of the international rankings, prevent corruption practices etc and these are some of the reasons why people although are
going through difficulties are lauding this measure of the government

But after having discussed so much, will this measure eliminate all the black money in the economy? The answer simply would be a confirmative NO as it
has been seen that the black money is stored in various forms other than cash (such as gold, jewellary, assets etc) and as per A 2012 report prepared by
National Institute of Financial Management – on unaccounted income – found that cash was the least preferred option for storing unaccounted wealth

 Other measures taken by the present government in controlling the menace of black money
o One of the first cabinet decisions taken by the government was to set up SIT (Special Investigation Team) on Black Money
o The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, came into force on July 1, 2015 under which the tax
rate imposed was 60%
o Further upon the leaks of Panama Papers, the government constituted a Multi-Agency Group (MAG) comprising officers of the Central Board of
Direct Taxes, Reserve Bank of India, Enforcement Directorate and Financial Intelligence Unit.
o Lok Sabha recently has passed the Benami Transaction Bill, 2015 which is an anti-black money measure which aims to seize unknown property
and prosecute those indulging in such activities.
o This year the government has amended its DTAAs and is in negotiations with some other countries
o It is also under negotiations with the authorities in Switzerland in signing Automatic Exchange of Information (AEOI)
o In this year’s budget government had announced IDS (Income Declaration Scheme) under which it has successfully collected Rs 65250 crore in the
form of taxes
When PM Modi announced that Rs with the denomination of 500/- and 1000/- would cease to be the legal tender from 9th of Nov, the whole
country was stunned. This decision caused sensation in the whole country. Social Media was flooded with messages and information. People
started counting the trash they had accumulated for years legally or illegally.
Rumours became rife. Some tried to invest their dying currency in gold. Some contacted their near and dear ones in this miserable hour.
People could get only Rs 4000/ of old denomination exchanged with the new one. Big lines became the order of the day.
Instead of getting shorter, these queues were getting longer with every passing day. The last date for the whole process was 30th of
December. The persons could deposit the old cash worth Rs 2.5 lac till the said date.
The main objective of this move was to curb the black money, corruption and fake money menace. All the people but those who were
indulged in malpractices welcomed the move. The whole opposition shook hand against this move under one pretence or the other. They
called this decision a draconian law and wanted the govt to roll back it. Tirades were made to target the decision. Govt also carried out
counter attacks.
The new currency which replaced the old one is of denomination of 500/- and 2000/-. Though the people faced a lot of inconvenience owing
to shortage of funds, they did not criticize the govt for the move. Even they lauded the Modi govt for this big move. Prime Minister also
addressed the people many times telling the people that it was a mahayajna (ममममममम ) and they must offer their own ahuti ( ममममम
) in it.
He further said he was aware the hardships they were suffering from but he sought only 50 days for setting the things right. He jibed at the
chief political leaders who have stashed big amount of money and now joined hand to force govt to take the decision back.
The most interesting thing regarding the demonetisation is that people are devising various unique methods for transforming their black
money in to white one. Some of these methods are as follows –

 Depositing money in the accounts of their poor relatives and friends.

 Enticing the people with some percentage of money for exchange.
 Asking their employees to stand in the long queues in front of Banks and ATMs for getting money exchanged.
 Hiring labors for some Rupees ranging from Rs 500/- to 700/- for becoming the part of long queues in front of banks/ ATMs.
 Converting black money in to gold.
 Paying a few months salaries in advance.
 Paying back loans forcibly.
 Using their influence / links with bank employees and so on.

Impact of Demonetization on Indian Society/

Economy –
We shall see a great impact of this move of the Central Govt on Indian Society and Economy. The first impact shall be that people will have
lower expenditure power. With that they will not be able to purchase luxurious things.
There shall be no ostentatious expenditures on marriages and other ceremonies. So the society will grow lesser materialistic and people
more prudent. With the fake money destroyed, Indian economy will see a big boom and the so far booming real estate sector shall fall on
the ground.
The things shall be cheaper. Indian Currency shall get respect at the international market. There shall be a great check on the terror-related
funding and therefore on terrorist activities. Corruption shall be down to a great extent as people will stop the tendency of accumulating
money using wrong means.
It will abridge the gap between the haves and the have nots. However, there may be some difficulties for a couple of months. But this
inconvenience shall be temporary and for short-term.
Read Important Facts/ Questions on Demonetisation in India

Currency Demonetization: Essay by Anubhuti Maithani, NALSAR

november 11, 2016

By Anubhuti Maithani, NALSAR

On the evening of 8th November 2016, Prime Minister Narendra Modi made an unprecedented speech on national television which opened the floodgates
of Facebook memes and WhatsApp jokes before making way for more serious discussions.

All currency notes of denominations Rs. 500 and Rs. 1000 were to lose legal sanction from midnight. While currency notes of Rs. 500 are now to be re-
issued, Rs. 1000 currency notes will be completely done away with. Additionally, technologically advanced currency notes of denomination Rs. 500 and
Rs. 2000 will be introduced in limited numbers from November 10. However, all notes in lower denomination will remain unaffected.

The objective is to curb black money, corruption and terrorism.

In his 40-minute address, Modi said that notes of Rs. 500 and Rs. 1000 would merely be “just worthless pieces of paper”. Modi talked about how India has
become the “bright spot” in the global economy and the government’s dedication to fight against poverty and initiatives towards participation of the poor in
the benefits of economic progress.

The Reserve Bank of India, later in its press conference, said that India remains a cash based economy hence the circulation of Fake Indian Currency Notes
continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw these currency notes has been
introduced.

Several impacts of this decision can be ascertained.

Although people with black money obviously stands the most affected, there are several implications that have to be faced by the average middle class
person, farmers, banks and the economy as a whole.

Although there will be an apparent inconvenience to the common man initially, given the short span of time to get these currency notes exchanged or
deposited in banks and post offices, but he/she is expected to adapt to the new currency system in a reasonable time.

Rural area farmers will have slightly more inconvenience keeping in mind that this is the Rabi crop harvest season, where the farmer must have earned cash
for their harvest. This concern was raised by the Congress spokesperson Randeep Surjewalla.

Also, in rural areas the exchange and deposit system can be expected to take a long time in case there is a bank in the village and inconvenience in terms of
transportation, additional expenses and time is easily foreseeable in case there is no bank in the village and the people have to go to the city for this
purpose.

The banks, however, are expected to experience two types of problems. One is the logistical problem of handling all the money in case a large number of
people choose the easier way of depositing all their cash in their bank accounts or of providing smaller denomination currency notes in case there is a huge
demand for withdraw or exchange.
The other problem is the managerial difficulty of handling long queues and the overburden of work in the next couple of days. This expectation gave rise to
the government’s decision of shutting down banks for public dealings for one day and instead let them deal exclusively with issues relating to deposit or
exchange the demonetized currency notes.

In terms of the impact on the economy, there has been speculation about deflation in the economy by one set of people due to expected fall in corruption
and black money while the other expects inflation to take place due to speculated increase in investment of Gold, real estate and foreign currency.

Narendra Modi’s decision has also had its share of criticisms and concerns already. These span from the inconvenience caused to the common man to the
assertion that the plan does not solve the problem at all.

The obvious concern raised is of the impending inconvenience which will be caused to common man due to the operation of this decision.

ATMs will not operable on 9th and 10th November, only 50 days are provided for exchanging and depositing notes in banks and post offices, and even
though officially some emergency places like hospitals, train/bus bookings, petrol pumps, etc. are supposed to accept these invalid OHD notes till 11th
November midnight, in reality even these people will avoid taking these notes since petrol pumps and retail outlets will have to keep a record of every
single transaction involving these OHD notes.

The Rs. 2000 and new Rs. 500 currency notes will be circulated in limited numbers. National Highways are made toll tax free till November 11th after
seeing a day of delays and jams on these highways owing to the lack of smaller currency with people.

Considering the fact that only about half the population of India has a bank account (World Bank report), there is a substantial section of the society that
will find it difficult to get their currency exchanged.

In the FAQs provided on the RBI website, it states that in case a person does not hold a bank account, he/she can open one now and then transact through
her account. However, this doesn’t seem like an excellent plan. For instance, some expected problems of opening new bank accounts can be lack of
incentive and lack of formal identification papers.

Some other concerns that came to light was that even though people applauded the initiative, they were unsatisfied with the small window of time provided
for both legal transaction of higher denomination currency and the short span of 50 days provided for exchanging or depositing your currency notes at bank
branches or post offices.

Now let’s address the big question: will it work?

Given the fact that black money is stored in various forms such as Gold, real estate, overseas tax havens and cash, demonetizing currency notes of Rs. 500
and Rs. 1000 will only curb black money that is in the form of physical/ hard cash. But since this form of black money, after this step, is the only form we
can tackle right now, there does not seem to be a reason why we shouldn’t.

In other words, if the plan does not seem to address all facets of the problem, it does not necessarily mean that it is an inadequate solution. This is all the
more legitimate in the face of lack of alternatives. According to the World Bank 2010 report, black money formed about 23.2 percent of India’s GDP in
2007. Given such a state, we cannot afford to wait for a better comprehensive solution.

There have been prior examples of such a move in various countries. In February this year, Europe was considering abolishing circulation of 500 Euro bills
in order to curb tax evasion and terrorism funding. In the same month, US treasury secretary Larry Summers recommended that the $100 bill be
demonetised.

However, it is essential to note here that although it is an excellent move towards curbing corruption, the plan can by no means be a conclusive step.

The government has initiated a war against corruption and black money but this must be treated as a beginning and further steps should be taken to stop
generation of black money and the need to do so. Only then will this decision of demonetising high denomination currency hold the significance the
government has intended it to.

Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000- Demonetization

Essay
Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000 -Hello friends Welcome To StudyDhaba.com .Here We are Sharing Some
important Points About -Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000 .essay on demonetise in india

Demonetization is a very bold Decision taken by Indian government for Curbing all Black Money in India . Major Aim of Demonetization is Making India
A Cash less Society .

All Details and information is given below .Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000
  What is Demonetization ?
 Pros and Cons of Demonetization ?
 Demonetization Effects on Indian Economy ?
 Why Indian Government Banned Rs 500 and Rs 1000 Notes ?
 What Are The Causes of Demonetization ?

Before We Discuss All these points Here We are providing you Definition of Demonetization .Demonetization Pdf – Pros and Cons of Demonetization
Rs 500,1000

What Is Demonetization ?

 Demonetisation is a process by which a series of currency will not be legal tender. The series of currency will not acceptable as valid currency.
The same thing happens with the Rs. 500 and Rs. 1000 note demonetization.

What are the causes of Demonetization?

 There can be many causes of Demonetisation in any economy some of them are : Introduction of New Currency ,Black Marketing, Currency
Storage, Corruption and others.
 There will be excess fake currency in the economy is main reason of demonetisation.

What Happened on Demonetization?

 On 8th November 2016, Government of India had announced that from today onward rupees 500 and 1000 rupee note will not be a legal
tender.
 This means that 500 and 1000 rupee note will be accepted by anyone except the organisation declared by government.
 They can change the currency from the banks and post offices till 30th December 2016.

Demonetization History and Background In India ?

 This is not The First time When Indian Currency is Demonetised In India .
 The first instance was in 1946 and the second in 1978 when an ordinance was promulgated to phase out notes with denomination of Rs 1,000,
Rs 5,000 and Rs 10,000.
 The highest denomination note ever printed by the Reserve Bank of India was the Rs 10,000 note in 1938 and again in 1954. But these notes
were demonetized in January 1946 and again in January 1978, according to RBI data.

 Rs 1,000 and Rs 10,000 bank notes were in circulation prior to January 1946. Higher denomination banknotes of Rs 1,000, Rs 5,000 and Rs
10,000 were reintroduced in 1954 and all of them were demonetized in January 1978.

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 The Rs 1,000 note made a comeback in November 2000. Rs 500 note came into circulation in October 1987. The move was then justified as
attempt to contain the volume of banknotes in circulation due to inflation.
 Indian Currency
Details
Demonetization

 However, this is the first time that Rs 2,000 currency note is being
introduced.
 Bank notes in Ashoka Pillar watermark series in Rs 10
denomination were issued between 1967 and 1992, Rs 20 in 1972
and 1975, Rs 50 in 1975 and 1981 and Rs 100 between 1967-1979.
 The banknotes issued during this period contained the symbols
representing science and technology, progress and orientation to
Indian art forms.
 In the year 1980, the legend Satyameva Jayate — ‘truth alone shall
prevail’ — was incorporated under the national emblem for the first
time.
Important Facts About  In October 1987, Rs 500 banknote was introduced with the portrait
Indian Currency and of Mahatma Gandhi and Ashoka Pillar watermark. Mahatma Gandhi
Demonetization (MG) series banknotes – 1996 were issued in the denominations of
Rs 5, (introduced in November 2001), Rs 10 (June 1996), Rs 20
(August 2001), Rs 50 (March 1997), Rs 100 (June 1996), Rs 500
(October 1997) and Rs 1,000 (November 2000).
 The Mahatma Gandhi Series – 2005 bank notes were issued in the
denomination of Rs 10, Rs 20, Rs 50, Rs 100, Rs 500 and Rs 1,000
and contained some additional/new security features as compared
to the 1996 MG series.
 The Rs 50 and Rs 100 banknotes were issued in August 2005,
followed by Rs 500 and Rs 1,000 denominations in October 2005
and Rs 10 and Rs 20 in April 2006 and August 2006, respectively.

What is Impact of Demonetisation? What are Pros and cons of demonetization in India in 2016?

 There is huge impact of Demonetization of Indian Economy . These 500 And 1000 Notes Contribute more than 84 % of Money Circulation .
 This Decision Has A direct impact on Money Circulation .

Pros And Cons Of Demonetization-essay on demonetise in india

Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000

Pros Details
 Pros Details

 People who possess huge amounts of black money in hard cash are at a
complete loss now .
 Their black money in hard cash is now a pile of trash.
Attack On Black
Money Holders
 Now If a Black money holder Want to Deposit Money in Bank Account
Than he/she Has to Show ID .
 There Will Be 200 % Penalty On Income tax Amount .

 Most of the fake currencies used to be be in the denominations of Rs. 500

and Rs. 1000 .
Death Knell To Fake  By banning Rs. 500 and Rs. 1000 notes, Modiji has busted all these
Currency Rackets unethical rackets completely .
 Now There Will be no use These Money

 Huge sums of money especially in hard cash in the denominations of Rs.

500 and Rs. 1000 was used to fund Islamic terrorists , Naxalites and other
non-state actors
End Of Terrorist  Now , these Organizations will suffer from shortage of funds .
Funding  Most of These terrorist ,Maoist Organization Used These Funds For Buying
Arms and Weapons
 Buying arms is an extremely difficult task now after this ban .

 Online transaction = More transparency = Financial Intelligence Unit Will

tack All Online transactions
Transparency
 Now there Will be More Transparency In Real Estate Sector

 Huge amounts of donation that is taken in the private education and

healthcare sectors would be stopped .
 Schools, engineering and medical colleges and hospitals ( private ones)
used to take huge amounts of money as donations especially in the form
End of Huge of hard cash in the denominations of Rs. 500 and Rs. 1000
Donations .StudyDhaba.Com
 These money-minded people running these institutions won’t be able to
make any easy money now .
 Same applies to the real estate sector.

 While it is practically impossible to have a 100% cashless economy , the

proportion of hard cash in the economy will decrease and our economy
Towards A Cashless
Economy will get more digitized .
 This will result in greater transparency .
 Now government has put Some limitation for Cash Withdraw from bank
 Pros Details

Accounts. People Will go for online payments ,They Will Use PayTM Or
other Online payment Companies For Buying goods or Making payments.
 More Use of Debit and Credit Card

 Most Hawala transactions used to be carried out in the denominations of

Rs. 500 and Rs. 1000 .
Hawala Transactions  With this ban , Modiji has delivered a fatal blow to the unethical Hawala
End traders as they can’t trade anymore using denominations of Rs. 500 and
Rs. 1000 .

Cons of Demonetization – Here Is the List of Cons of Demonetization

Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000 – Here We are providing you All important points Related to Posistive impact of
Demonetization on Indian Economy or We can Pros of Demonetization .

Cons Details
Cons Details

 Banks will be extremely over-crowded by people .

 People will forget everything else and throng to the places where the
Rush At Banks banned notes are being officially exchanged leading to a tremendous
chaos .

Shortage of Money To  There Will be Shortage of Money For Common people .

Common People

 Due to currency being sucked out of the market coupled with Trump’s
victory, the mood at the stock market was completely bearish .
Stock Market  Sensex lost 1600 points at open . This can adversely have a negative effect
on trade in general .

 Many Indian housewives store money secretly so that they could be of

help during times of financial crisis in their households .
Problem For House
Wives
 The accumulated money of our respected Indian housewives is of no use
now until they exchange in the banks and post-offices .

 Due to shortage of money in the market , a short-term cost push inflation

will occur .
 The price of gold has already become sky high .
Short Term Inflation
 Prices of vegetables and fruits have also soared burdening the common
man .

 Difficult For Those Families those have Weddings.

Marriage Season

Impact of Demonetization on Indian Economy

Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000 – Here we are Sharing Impact of Demonetization on Various Sectors of India .Both
Long term and Short term impact of Demonetization ,Positive and Negative impact of Demonetization on Indian Economy .

Download UPSC Topper Gaurav Agarwal And Tina Dabi Notes

 Section Details

 The removal of these 500 and 1000 notes and replacement of the same with new
500 and 2000 Rupee Notes is expected to – remove black money from the
economy as they will be blocked since the owners will not be in a position to
Effects on
Parallel
deposit the same in the banks
Economy  Temporarily stall the circulation of large volume of counterfeit currency
 It would curb the funding for anti-social elements like smuggling, terrorism,
espionage, etc.

 With the older 500 and 1000 Rupees notes being scrapped, until the new 500
and 2000 Rupees notes get widely circulated in the market, money supply is
expected to reduce in the short run.
Effects on
 To the extent that black money (which is not counterfeit) does not re-enter the
Money
Supply system, reserve money and hence money supply will decrease permanently.
 However gradually as the new notes get circulated in the market and the
mismatch gets corrected, money supply will pick up.

The overall demand is expected to be affected to an extent. The demand in following

areas is to be impacted particularly:

o Consumer goods
Effects On
o Real Estate and Property
Demand
o Gold and luxury goods
o Automobiles (only to a certain limit)