Demonetization of old 500 & 1000 rupees notes – Is it a good move?

old-notes

Background :-

  • On 8th November 2016, Indian Government demonetized 500 and 1000 rupee notes that are in circulation, and announced the issuance of new 500 and 2000 rupee notes.
  • Time limit was set to exchange old notes with new ones.

Reasons for this move :-

  • To counter black money and fake currency. People who have black money cannot be able to deposit the old currency easily. So black money can be taken out of circulation.

In Favor :-

  • A good chunk of black money will be taken out of circulation strengthening India’s economy.
  • This step will instill fear among the tax evaders that they are not inescapable if they follow illegal practices.
  • This move is a big blow to the corruption, drug trafficking and smuggling, because all these activities are carried out with black money.
  • Most of the fake currency will be out of the system.
  • Old notes are allowed to be paid for utility bills. In the one week span after the demonetization move, lots of outstanding bills are cleared, which will have positive impact on economy.
  • Supreme Court responded negatively to the petition asking for withdrawal of the demonetization move and said that the move is laudable.
  • With the inconvenience caused to farmers in the Rabi crop season, Govt of India relaxed the demonetization rules and said that farmers can now buy seeds with the old 500 notes.
  • Common people should bear the inconvenience for the greater good of the society.
  • International response to this move is positive.
  • ‘Chattisgarh’ is the first state to pass notion supporting the demonetization move.
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Against :-

  • It caused a lot of inconvenience to common people. People are forced to stand in long queues at ATMs and banks as there is very low limit of withdrawal each time.
  • Still there are many Indians, especially in the below poverty line section that have no bank accounts. They will have no other option, because one person can exchange old notes worth Rs.2000/- only. Remaining amount can be deposited in the bank accounts.
  • People who are in emergency situations such as medical emergencies and marriage ceremonies are suffering because of the present situation.
  • Cost of demonetization is more than its benefits.
  • Most of the black money may not be in terms of physical cash.
  • 85% of transactions in India are cash transactions. So It may not be the right move to force everyone towards cashless transactions all of a sudden.
  • Once the new notes come into circulation, the problem of black money may return to the previous position.
  • ‘Delhi’, ‘Uttar Pradesh’ and ‘West Bengal’ are opposing the move.
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Conclusion :-

Demonetization of higher denomination notes is a good move but with poor execution. Government would have given alternatives for common people. It would have taken steps to avoid inconvenience to commoners. But this move will surely strengthen India’s economy, which in turn benefits common people.

Afterwords :- Do you think demonetization of old higher denomination currency notes is a good move? Did we miss any point? What are your thoughts on this topic? Express your opinion in the comment section below.


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