demonetisation in india, its history, pros and cons, etc

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1. Content Introduction History Impact Pros & Cons Conclusion Short-Term Impact Long-Term Impact

2. Introduction to Demonetisation Demonetisation is the process of stripping a currency unit of its status as legal tender. In India, demonetisation was implemented to achieve various objectives: Reasons Behind Demonetisation Curbing the circulation of black money and counterfeit currency. Promoting digital transactions and reducing cash-based transactions. Combating corruption, terrorism financing, and illegal activities.

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

4. History of Demonetisation in India 1946 Demonetisation The first major instance of demonetisation in India took place in 1946 when the government demonetised the high-value currency notes of ₹1,000 and ₹10,000 . Its main aim was to curb the increasing black-market operations, which was a result of World War II.  Since these high-value currencies were not accessible to most public, the ban did not have a huge public impact. The notes were re-introduced in 1954 with Rs. 5000 notes. 1978 Demonetisation The Prime Minister, Morarji Desai, announced a ban on the currencies of denominations 1000 , 5000 , and 10,000 in 1978. The objective was to curb black money and counterfeit currency circulation. While it did achieve some success in curbing black money temporarily, the impact on the overall economy was limited.

5. History of Demonetisation in India 2023 Demonetisation On  19 th  May 2023 , RBI declared the   withdrawal of Rs.2,000 notes  as a part of its  ‘clean note ’ policy . People had time till 30 th  September 2023 to exchange such notes at banks or designated RBI offices.  However,  Rs.2,000 notes will remain as a legal tender even after that date.     On social media, this news was often described to as a ‘soft demonetisation’ move. 2016 Demonetisation The most significant instance of demonetisation in India occurred 8 th November 2016 , when the government demonetised the high-value currency notes of ₹500 and ₹1,000 . The objective was to combat black money, corruption, and counterfeit currency, as well as promote digital transactions. The immediate impact was a severe cash crunch and disruption in the economy, particularly for the informal sector and rural areas. While the long-term effects are still debated, demonetisation did lead to a significant increase in digital transactions and a push towards formalization of the economy.

6. BUSINESS INFLATION CONSUMPTION EMPLOYMENT GDP INVESTMENT IMPACT OF DEMONETISATION IN INDIA

7. Immediate Impact of Demonetisation Impact on Consumption Decreased consumer spending as people faced difficulties in accessing cash. Shift towards digital and electronic payment methods. Impact on Businesses Disruption of cash flow and liquidity challenges for small and informal businesses. Decrease in sales and revenue due to reduced consumer spending. Impact on Employment Temporary job losses and layoffs in sectors heavily reliant on cash transactions. Slowdown in hiring and job creation in the short term.

8. Long-term Effects of Demonetisation Impact on GDP Demonetisation had a short-term negative impact on India's GDP growth as it disrupted economic activities and reduced consumer spending. However, in the long run, it aimed to improve tax compliance and formalize the economy, which could have positive effects on GDP. Inflation Demonetisation initially had a deflationary effect on prices due to reduced consumer spending. Over time, it was expected to reduce inflation by curbing black money and promoting digital transactions.

9. Long-term Effects of Demonetisation Investment Demonetisation was expected to encourage more investments in the formal sector as it aimed to reduce the influence of the informal economy. However, its long-term impact on investment is still a subject of debate.

10. PROS & CONS PROS Black Money Recovery Improves Currency Circulation Curbed Terrorism and Anti-National Activities Increase in Tax-filers Paved Way for Digital Transactions Controls Circulation of Counterfeit Currency

11. PROS & CONS CONS Causes Panic Among the Public Unemployment Halt in the Economic Development Recalibration of ATMs Short-term Downfall in the GDP Payment Crisis

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