Demonization???????

Demonetization” refers to the currency of a particular denomination losing all its worth after a certain point of time as declared by the government. If a government declares demonetization of a legal tender, it means that the currency of that particular denomination seizes to be used in any business transactions, in other words the money loses its worth in the market. The possessor of the currency has no option but to get it exchanged in a bank, thus, declaring it to the government and paying necessary taxes.When a government scraps the legal tender of a certain denomination, it is termed as demonetization. Usually the tender thus scraped is replaced by new currency by the government. The government of India had previously announced demonetization on three occasions – first in 1946, second in 1978 and third in 2016, with the aim of countering black money, tax evasion and fake currency.Government of India in a historic decision demonetized the currency notes of Rs. 500 and Rs. 1000 on 8^th November 2016. Prior to demonetization, there was high amount of black and counterfeit currency notes in Indian market. Also, there was high amount of untaxed currency available with individuals and agencies in form of hard cash. Getting such counterfeit and untaxed money back into the main stream was necessary to strengthen the nation’s economy and banking system.

Bringing Untaxed Money in Mainstream

Prior to the demonetization, there were many fair players in the Indian economy who were out of the precincts of the banking system. These constituted of small farmers, businessmen and there was a need to bring them back into main stream.

Curbing Corruption....

Corruption deals in unaccounted and undeclared money. There was huge amount of money circulated in India in the denominations of Rs. 500 and Rs. 1000 for corrupt deals in private as well as the government sectors. Present of this unrecorded money in high amount, not only was fuelling corruption, but also making Indian Rupee weaker. Demonetization was the need of the time, to curb corruption as well as to strengthen Indian Rupee in international market.

Boost to Cashless Economy....

Demonetization was effective in many ways. Initially it did lead to chaos and confusion due to shortage of new currency and long queues in banks and ATMs; nevertheless, the decision had some positive effects too. Indian demonetization of 2016 was effective in making India a cashless economy. With the scarcity of cash and due to the long queues outside banks, people and businesses turned towards digital transactions. Any digital transaction comes under the radar of government, ultimately resulting in more tax payments and less circulation of unaccounted money in the market; subsequently, resulting in strengthened banks and improved economy.

Gave Way to Digital Transaction.....

Digital transactions in many cities had doubled post demonetization. Digital payment gateways like Paytm and MobiKwik recorded unprecedented increase in the number of users. Apart from an increase in the digital transactions throughout India, there was also a high amount of deposition of old currency, bringing it back into main stream. According to the records more than three Trillion Rupees were deposited in banks during the period of demonetization.

Though, the move of demonetization was supported by banks and some international commentators, it also faced a fair amount of criticism from various factions inside India. Many opposition parties deemed the move as useless and unnecessary. The critics were of the opinion that demonetization will hamper economical growth, rather than boosting it.

Long queues of people outside the banks were made an issue, by political class and presented as an act inhuman and anti poor. They claimed that the real possessors of black money had somehow already convened with the banks to exchange their illegal currency, thus resulting in the shortage of cash. The government was also accused of poor planning and management.

A Public Interest Litigation (PIL) was also filed by Indian National League, in Madras High court, requesting scraping of demonetization decision; however, the Court refused to intervene in the government’s monetary decision.

Whatever might have been the controversies surrounding the demonetization and whatever might be the claims made by critics, there is no denying the fact that the decision was taken in national interest. Though, it might have missed to achieve some goals, but it did hit some significant ones like – bringing black money into the banks, reducing inflation, curbing anti national, illegal activities and making India a digital economy.The decision of demonetization was taken keeping the national interests in forefront. Though, the decision might have caused inconvenience to general population, it definitely had national interest and economic growth at its core. For decades India has been reeling under naxalism and terrorist activities. Demonetization, although for a brief while, actually stopped such anti-national activities, giving relevant agencies time to take counter measures and identify their funding sources, while boosting India’s economy in long run.Demonetization isn’t new to the world. Governments across the world have been taking the decisions of demonetization since the past century, from time to time. Though, the currency which was demonetized may differ, the objectives largely have remained the same i.e. to counter inflation, black money, stop illegal activities, pull back counterfeit currency out of the economy, bring unaccounted money under the scanner of tax agencies and to erase accumulation of large untaxed cash by individuals.