The document discusses India's recent demonetization of Rs 500 and Rs 1000 currency notes. It provides background on previous instances of demonetization in India in 1946 and 1978. It outlines the rationale given by the Prime Minister for demonetization, including tackling black money, corruption, fake currency, and terrorist financing. It also discusses the short-term economic impacts and support and criticism of the move from various groups.

1. Akarshan Sanan
Anshita Bansal
Agostinho Ntawle Junior
Akshat Kumar

2.  Demonetization in the past
 Background
 What is demonetization and how was it introduced ?
 Impact and consequences
 Reaction , support and criticism
 Conclusion

3. 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.
In 1946, RBI governor was skeptical of
government’s move to strip currency of
legal tender characteristic at short
notice.
s 1,000 and Rs 10,000 bank notes were

4. 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 an attempt to
contain the volume of banknotes in
circulation due to inflation.
Old Note Rs 10 000

6.  Corruption is one of the major issues in
India today, an evil so deeply rooted in
our country that eradicating it is as
humongous a task as building a nation from
scratch. It holds back our economy, widens
the gap between rich and poor, intensifies
equitable distribution of income, funds
terrorism, etc, among many others.
Needless to say, it needs to be done away
with as quickly as possible.

7.  If hindrance of growth and national
dignity aren’t reasons enough,
consider this- corruption has been
proved to fuel terrorism. Patrons may
use secret companies and transfer
funds illegally in order to support
organized crime and terrorist
groups. For example, Al Qaeda has
allegedly been known to set up a
charity as a front for their finances.
Traffickers, corrupt politicians and
terrorists need ways to raise, move,
conceal and spend money. The shadows
of corruption provide them with the
perfect opportunity.

8.  Even keeping that out of the picture, it is
important to understand that black money
constitutes a major part of the GDP in India.
The situation doesn’t seem so dire because
black money acts as a catalyst that keeps the
demand going. However, in reality, the
problem is that investment is not taking
place in the economy and the rate of growth
of capital formation is down. The only way to
bring this up is to divert more funds into
investments which will happen when the cost

10.  Demonetization for us means that
Reserve Bank of India has withdrawn the
old Rs 500 and Rs 1000 notes as a
official mode of payment. According to
Investopedia, demonetization is the act
of stripping a currency unit of its
status as legal tender

12.  The reasoning given by our Prime Minister
was:
1. To tackle black money in the economy.
2. To lower the cash circulation in the country
which "is directly related to corruption in
our country, " according to PM Modi.
3. To eliminate fake currency and dodgy funds
which have been used by terror groups to
fund terrorism in India.
4. The move is estimated to scoop out more than

14.  Not the honest taxpayers. Even if you have Rs
10 lakhs as cash with you and you can prove
its legitimacy, you don’t need to worry.
 The surprise move by government is a disaster
for people who have accumulated lakhs and
crores of unaccounted cash under their
pillows and mattresses. The winter is coming
and these worthless pieces of paper can
provide the corrupt some ephemeral warmth.

16. Since our economy is heavily dependent on
cash, as only less than half the population
uses banking system for monetary
transactions, demonetization has hit trade
and consumption hard. With people scrambling
for cash to pay for goods and services, the
move is likely to take a big toll on the
country's growth and output during the
current fiscal. Consumption makes up for
around 56% of India's GDP , hence, a drop in
spending will pull down growth. The current
step could also lead to behavioural changes

17.  The liquidity squeeze caused by demonetization will
be negative across sectors with high level of cash
transactions. Real estate, jewellery, retailing,
restaurants, logistics, consumer durables and luxury
brands, cement and some segments in retail/SME
lending space will be facing short term instability.
Those companies with high level of debt will face
more pressure and can face loan defaults.
 Secondly, there will be an added replacement costs
of currency. We cannot ignore the increased cost of
operating ATMs need to be refilled more often and
also it will be a huge burden on banks. Initially,
it is very difficult to create a cashless society as

18.  One of the biggest benefits of this move is that it
is going to drastically affect the corrupt
practices. People who are holding black money in
cash will not be able to exchange much as they would
be in a fear of getting penalized and prosecuted by
the authorities. Enemies of the country which are
involved in counterfeit currency and terrorism will
not be able to continue it further for quite some
time at least.
 it will reduce the risk and cost of cash handling as
soft money is safer than hard money. It will also
reduce government liability. Since every note is a
liability for the government, the old currency will

19.  It will also reduce tax avoidance. Whatever money
will be deposited or exchanged, authorities will
keep a track of it and they will be extra cautious
in this period. Dealing in this period in sectors
like jewellery and real estate will be on radar and
those entering into Loan transactions may also
undergo tax scrutiny. Search and Seizure activities
of the IT Department will also rise to curb such
malpractices. Limits have already been prescribed
for reporting to the IT Department those bank
accounts in which excess cash deposits are being
made in this 50-day window (Rs 2.5 lakh in case of
individuals and Rs 12.5 lakh in case of firms).

20.  India is certainly going to experience
"Acche Din" in Modi's regime. The
decision of this surgical strike on
black money was not taken in a day or
two. Rome was not built in a day and
similarly, this plan is the result of
Prime Minister's meticulous planning
and never ending fight against
corruption. As a result, he has
successfully made the right stroke at

22. SO HOW IS INDIA RESPONDING ?

24. Bijendra Kumar Srivastava:
I am fully in support of this move of
demonetization… The hardship is for few days. The
real pain is to politicians, doctors, engineers
,contractors, big farmers & top bureaucrats.Gaurav Gangwal: Really appreciating efforts by
govt. Now people are fearing to keep black money.
Most business men are saying now they will earn
less but whatsoever will be in whitewww.thewire.in post:
On Wednesday 16th November, the founder of Microsoft
Bill Gates had described demonetization as a “bold move”
and an “important step” in moving away from a shadow
economy.
(http://www.youthkiawaaz.com/2016/11/demonetisation-public-opinion/)

25. Ajay Shah notes:
Controlling corruption is not about blocking access to a
non-traceable store of value. There will always be
precious metals, US dollars, bitcoin, and jars of
Tide…. Solving the problem of corruption requires deeper
changes to institutions.
Amit Varma argues:
…most truly rich people don’t keep their wealth in the
form of cash, but in the form of real estate, gold,
deposits in foreign bank accounts and other benami
investments. They will be largely unhurt…it is the poor
who will be hurt the most by this.
www.thediplomat.com post:
On November 15th, the Supreme Court sat down to hear
multiple petitions and four Public Interest Litigations
regarding this move – some of which requested a complete
rollback of this policy due to its severe impact on
everyday citizens. The court decided not to stay the

26. Almost all the stalwarts of the banking
sector including Deepak Parekh, Chanda
Kocchar think that the move will help curb
black money in the economy.
According to MD & CEO, ICICI Bank Chanda
Kochhar who told ET Now, "this move will
definitely bring about a whole amount of
transition to no cash or low cash kind of
transactions,".
"A parallel black economy will collpase," one
of the leading lawyers in taxation laws,

27. HDFC Chairman Deepak Parekh anticipated that
the Land will become cheaper and "one expects
that real estate price will come down in
medium term."
But with all the positives, government has
not been able to explain anything for the
people who don't have a bank account.

29.  Central government’s recent decision
to demonetize the high value currency
is one of the major step towards the
eradication of black money in India.
The demonetization drive will affect
some extent to the general public, but
for larger interest of the country such
decisions are inevitable. Also it may
not curb black money fully, but
definitely it has major impact in