Advantage And Disadvantages Of Demonetization

Decent Essays

DEMONETIZATION Demonetization is the act of stripping out a currency unit as legal tender. It happens when change of national currency takes place. The form of money in circulation is pulled out and discarded, which might or often are replaced with new notes and coins. Many a times, a country replaces the old currency with the new ones completely. There can be several reasons why a government wants to enforce demonetization. Some of them are to discourage a cash-dependent economy, to counter inflation, to counter corruption and crime (terrorism, tax evasion), to encourage trade, etc. There are several advantages linked with the process of demonetization. The biggest and impactful benefit of demonetization is that it assists the government …show more content…

The sudden nature of the announcement—and the prolonged cash shortages in the weeks that followed—created significant disruption throughout the economy, threatening economic output. The claim put forward by the government was that the implementation would cut down the use of counterfeit and illicit cash to fund terrorism and illegal activity and inhibit the shadow economy. In a live televised address at 20:00 (IST) on 8 November2016, Prime Minister of India Narendra Modi announced the demonetization. Modi announced that the currency notes of 500 and 1000 rupees would be invalid post midnight and that new 500 and 2000 notes of Mahatma Gandhi series would be issued and must be exchanged with the old ones. In the days that followed, there was intense shortage of cash throughout the country. People stood in long and tiring queues all day to exchange notes and few deaths were also reported. The move was initially applauded by several bankers and international commentators. The move was also criticized as unfair and not well planned and was met with protests, strikes against the government in many regions of India and debates in the

Get Access