The document discusses India's demonetization of 500 and 1000 rupee notes in November 2016. It provides background on previous demonetizations in India in 1946 and 1978. The goals of the 2016 policy were reducing black money, counterfeiting, and moving toward a cashless economy. The short-term cons included bank lines and cash shortages, while the long-term pros were expected to be greater transparency, reduced corruption, and a more digitized economy. The impact on money supply and demand in different sectors is discussed. Overall the advantages of demonetization are seen as outweighing the short-term difficulties.

1. DEMONETISATION

2. WHAT HAPPENED ON DEMONETISATION?
On 8th November 2016, government of India had announced that from today
onwards rupees 500 and rupees 1000 note will not be a legal tender.
Means that 500 and 1000 rupee note will not be accepted by anyone except the
organization declared by government.
Public can deposit and change the currency from the banks and post office till
30th December 2016.

3. WHAT IS DEMONETISATION?
“Demonetisation is the withdrawal of a particular form of currency from
circulation”.
It is a process by which a series of currency will not be a legal tender.
The series of currency will not be acceptable as valid currency anymore.

4. HISTORY AND BACKGROUND IN INDIA
This is not the 1st time, when Indian currency is demonetized in India.
Earlier it was done in 1946 with the complete ban of rupees 1000 and 10000
rupee notes to deal with the unaccounted money i.e. black money.
Second time it was done in 1978 by govt headed by Morarji Desai when rupees
1000,Rs 5000 and Rupees 10000notes were demonetized.

5. AIM OF DEMONETISATION
• Making India a cashless society.

6. CAUSES OF DEMONETISATION
There can be many causes of demonetisation in any economy such as:
Black marketing.
Currency storage
Corruption
Fake currency, etc.

7. PROS OF DEMONETISATION
People who posses a huge amount of black money in hard cash are at a complete
loss now.
Their black money in hard cash is now a plie of trash.
Now if a black money holder wants to deposit money then he/she have to show
their ID.
Most of the fake currencies used to be in the denomination of rupee 500 and
1000. by banning these notes , Modiji has busted all these unethical rackets
completely.

8. Huge sums of money used to fund the Islamic terrorists, Naxalites. Now these
organization will suffer from shortage of funds.
Most of these terrorists, Maoists organization used these funds for buying arms
and weapons. Buying weapons is an extremely difficult task now after this ban.
Now there will be more transparency in real estate sector

9. TOWARDS A CASHLESS SOCIETY
While it is practically impossible to have a 100% cashless economy, the
proportion of hard cash in the economy will decrease and our economy will get
more digitized.
This will result in greater transparency.
Now govt has put some limitation for cash withdraw from bank accounts. People
will go for online payments. They will use pay tm or other online payment to
companies for buying goods or making payments.
More use of debit and credit cards.

10. CONS OF DEMONETISATION
• Rush at banks:
Banks will be extremely over rowded by people. People will forget everything else and
throwing to the places where the banned notes are being officialy exchanged leading
to a tremendous chaos.
• Shortage of money to common people.
• Stock market;
Due to currency been sucked out of the market coupled with trump’s victory, the
mood at the stock market was completely bearish.
Sensex lost 1600 points at open. This can adversely have a negative effect on trade in
general.

11. IMPACT OF DEMONETISATION ON INDIAN
ECONOMY

12. EFFECT ON MONEY SUPPLY
• With the older notes being scrapped, until the new notes gets widely circulated in
the market, money supply is expected to be reduce in short run.
• To the extent that black money does not re enter the system, reserve money and
hence money supply will decrease permanently.

13. EFFECT ON DEMAND
• The overall demand is expected to be affected to an extent. The demand in
following area is to be impacted particularly;
Consumer goods
Real estate
Gold and luxury goods
Automobiles

14. CONCLUSION
• The advantages are much dominating and it will be in the long term interest of
our country comfortably outweighing the cons.
• Govt need to take all the necessary steps so as to ensure that there will be a
smooth flow of currency exchanges.
• It will make a massive change in our economy.