Demonitisation in India

1. Sharique Arbaz
22LLBWA153
GL5361
Demonetization: Its Impact
on Indian Society

2. Definition of demonetization
 Demonetization of Currency
Demonetization refers to withdrawal of a
particular form of currency from circulation.
Demonetization is the act of stripping a
currency as a legal tender. In
demonetization current form of money is
removed from circulation & retired.

3. What Happened on Demonetization in
India?
 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 31th December
2016.
 It was the third such decision, the first two being taken in 1946 & 1978 with partial
success.

4. Background
 There is a background to the 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.
1) 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.
2) Government initiated a TAX DECLARATION SCHEME 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.
3) 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.

5. Objectives behind demonetization
The government’s stated objective behind the demonetization policy are as follows;
1) Attempt to make India corruption free.
2) To curb black money,
3) To control escalating price rise,
4) To stop funds flow to illegal activity,
5) To make people accountable for every rupee they possess and pay income tax
return.
6) Finally, it is an attempt to make a cashless society and create a Digital India.

6. Causes
 There can be many causes of
Demonetization in any economy some of
them are : Introduction of New Currency
,Black Marketing, Currency Storage,
Corruption and others.
 The excess fake currency in the economy
was main reason for demonetization.

7. Positive Impact of Demonetization
 Elimination of fake currency rackets.
 Surge in cash deposits.
 Halt over hawala transactions.
 Push towards digitization.
 Attack on black money holders.
 End of terror funding.

8. Negative Impact of Demonetization
 Shortage of cash to the common people.
 Decline in GDP
 Short term Inflation.
 Small Businesses worst hit.
 Effect on rural areas.

9. Experts & Economists View on Demonetization
 Arun Jaitley- According to Indian express, Mr. Arun Jaitley gives his
opinion that the demonetization is good for economy, Indian banks were
facing NPA problems since last many years, now banks will have more
money to lend for many sectors of the economy,
 Amartya Sen- According to Indian express, Prof. Amartya Sen said that
millions of innocent people have deprived from their money & being
suffered to get their own money back.
 Dr. Manmohan Singh- Dr. Manmohan Singh said in Rajya Sabha that
this demonetization is organised loot. In his speech he said that, the way
the scheme has been implemented will also harm the agriculture sector
in India, it will also harm small scale industry & informal sector of the
economy.

10. Conclusion
 Economists are busy in pointing out the pros & cons of the
demonetization policy but the government opines that the former
outweighs the latter. Even though there is a sufferings and agony
among the masses but the government is very optimistic & point out
that the benefits of this policy will be evident in long.