On November 8, the Indian Prime Minister Narendra Modi made an announcement for demonetisation of higher currency notes of INR 500 and 1000. Virtually, the historic move had been taken to further tightening of tough measures against fake currency and unaccounted money. Apart from these, the new norms have also been subjected to get rid of cash which is considered to be the main reason for continuously increasing corruption and terror functioning.
No doubt, it’s a good vision, but, in a country like India, where about 120 million people or more are living and cash usage by them are far more than others, it might get a bad effect on the economy. It is too soon to pass any comment on that outcome, but, by seeing at the current outgoings, unfortunately, the benefit is not as much as it should have been among the Indian masses.
Well, the demonetization process is neither way new to the world nor new to the country as well. The European Central Bank, for example, earlier in the same year, stopped issuing the 500-euro banknote. Besides, Singapore eliminated its largest currency note in the year 2014. South Korea is also on its move to phase out all coins by 2020.
In India, the demonetization had first got to see in 1946, when the government withdrew from circulation currency of denomination of INR 100. A time limit had also given for getting exchange such demonetised notes. With information available, total notes of the value circulation at that time was determined about INR 1235.93 crore out of which said currency notes accounted to about INR 143.97 crore.
Later on, in 1978, the government led by Morarji Desai announced not to circulate higher currency notes of INR 1000 and above from January 16. People were asked to exchange their such currency notes before January 19 at the banks and other public sector banks included under the registration of RBI. Demonetisation in 1978 was reportedly better implemented than that of 1946.
Likewise, the 2016 demonetisation move taken by the Prime Minister Narendra Modi is undoubtedly a great move but some space left blank that has to be taken into consideration before such implementation. However, it can’t be denied, the more drastic the move is, the more essential it is. Following are some of the effects of demonetization, do have a glance.
The government’s first and foremost objective for this action was to uncover black money holders but seems like a taxpayer’s, small farmers, daily wage laborers, merchants, sellers and small traders have to stand in long-lasting queues to exchange or withdraw their hard-earned money. On the other hand, people with a large amount of black money are doing nothing but using an unprincipled method to convert their money into a legitimate account. Read more Initiatives of Narendra Modi.
Moreover, most of the unaccounted money is often kept in the form of gold, land, buildings or kept abroad. So, in that case, there is nothing left behind beyond a slew of an amount which seems like already kept under account or deposited into the bank. Going by the reports, it is about only 4 percent of the total amount of unaccounted money on which taxes are yet to be paid.
It goes without saying that GDP is being highly impacted as consumption is falling day by day. Albeit, such demonetisation process may benefit the country in long-term in terms of income tax rates, loan rates and housing rates etc. Read more Business News.