Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000

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Demonetization Pdf - Pros and Cons of Demonetization Rs 500,1000

 

  • What is Demonetization ?
  • Pros and Cons of Demonetization ?
  • Demonetization Effects on Indian Economy ?
  • Why Indian Government Banned Rs 500 and Rs 1000 Notes ?
  • What Are The Causes of Demonetization ?

Before We Discuss All these points Here We are providing you Definition of Demonetization .Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000

What Is Demonetization ?

  • Demonetisation is a process by which a series of currency will not be legal tender. The series of currency will not acceptable as valid currency. The same thing happens with the Rs. 500 and Rs. 1000 note demonetization.

What are the causes of Demonetization?

  • There can be many causes of Demonetisation in any economy some of them are : Introduction of New Currency ,Black Marketing, Currency Storage, Corruption and others.
  • There will be excess fake currency in the economy is main reason of demonetisation.

What Happened on Demonetization?

  • 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 30th December 2016.

What is Impact of Demonetisation? What are Pros and cons of demonetization in India in 2016?

  • There is huge impact of Demonetization of Indian Economy . These 500 And 1000 Notes Contribute more than 84 % of Money Circulation .
  • This Decision Has A direct impact on Money Circulation .

Pros And Cons Of Demonetization-essay on demonetise in india

Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000

ProsDetails

Attack On Black Money Holders

  • People who possess huge amounts of black money in hard cash are at a complete loss now .
  • Their black money in hard cash is now a pile of trash.
  • Now If a Black money holder Want to Deposit Money in Bank Account Than he/she Has to Show ID .
  • There Will Be 200 % Penalty On Income tax Amount .

Death Knell To Fake Currency Rackets

  • Most of the fake currencies used to be be in the denominations of Rs. 500 and Rs. 1000 .
  • By banning Rs. 500 and Rs. 1000 notes, Modiji has busted all these unethical rackets completely .
  • Now There Will be no use These Money

End Of Terrorist Funding 

  • Huge sums of money especially in hard cash in the denominations of Rs. 500 and Rs. 1000 was used to fund Islamic terrorists , Naxalites and other non-state actors
  • Now , these Organizations will suffer from shortage of funds .
  • Most of These terrorist ,Maoist Organization Used These Funds For Buying Arms and Weapons
  • Buying arms is an extremely difficult task now after this ban .

 Transparency 

  •  Online transaction = More transparency = Financial Intelligence Unit Will tack All Online transactions
  • Now there Will be More Transparency In Real Estate Sector

End of Huge Donations 

  •  Huge amounts of donation that is taken in the private education and healthcare sectors would be stopped .
  • Schools, engineering and medical colleges and hospitals ( private ones) used to take huge amounts of money as donations especially in the form of hard cash in the denominations of Rs. 500 and Rs. 1000 .StudyDhaba.Com
  • These money-minded people running these institutions won’t be able to make any easy money now .
  • Same applies to the real estate sector.

Towards A Cashless Economy

  •  While it is practically impossible to have a 100% cashless economy , the proportion of hard cash in the economy will decrease and our economy will get more digitized .
  • This will result in greater transparency .
  • Now government has put Some limitation for Cash Withdraw from bank Accounts. People Will go for online payments ,They Will Use PayTM Or other Online payment Companies For Buying goods or Making payments.
  • More Use of Debit and Credit Card

Hawala Transactions End

  •  Most Hawala transactions used to be carried out in the denominations of Rs. 500 and Rs. 1000 .
  • With this ban , Modiji has delivered a fatal blow to the unethical Hawala traders as they can’t trade anymore using denominations of Rs. 500 and Rs. 1000 .

 

Cons of Demonetization – Here Is the List of Cons of Demonetization 

Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000

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ConsDetails

Rush At Banks

  •  Banks will be extremely over-crowded by people .
  • People will forget everything else and throng to the places where the banned notes are being officially exchanged leading to a tremendous chaos .

Shortage of Money To Common People

  •  There Will be Shortage of Money For Common people .

Stock Market

  •  Due to currency being sucked out of the market coupled with Trump’s victory, the mood at the stock market was completely bearish .
  • Sensex lost 1600 points at open . This can adversely have a negative effect on trade in general .

Problem For House Wives

  •  Many Indian housewives store money secretly so that they could be of help during times of financial crisis in their households .
  • The accumulated money of our respected Indian housewives is of no use now until they exchange in the banks and post-offices .

Short Term Inflation

  •  Due to shortage of money in the market , a short-term cost push inflation will occur .
  • The price of gold has already become sky high .
  • Prices of vegetables and fruits have also soared burdening the common man .

Marriage Season

  •  Difficult For Those Families those have Weddings.

Impact of Demonetization on Indian Economy

Demonetization Pdf – Pros and Cons of Demonetization Rs 500,1000 – Here we are Sharing Impact of Demonetization on Various Sectors of India .Both Long term and Short term impact of Demonetization ,Positive and Negative impact of Demonetization on Indian Economy .

Section Details 

Effects on Parallel Economy

  • The removal of these 500 and 1000 notes and replacement of the same with new 500 and 2000 Rupee Notes is expected to – remove black money from the economy as they will be blocked since the owners will not be in a position to deposit the same in the banks
  • Temporarily stall the circulation of large volume of counterfeit currency
  • It would curb the funding for anti-social elements like smuggling, terrorism, espionage, etc.

Effects on Money Supply

  • With the older 500 and 1000 Rupees notes being scrapped, until the new 500 and 2000 Rupees notes get widely circulated in the market, money supply is expected to reduce in the short run.
  • To the extent that black money (which is not counterfeit) does not re-enter the system, reserve money and hence money supply will decrease permanently.
  • However gradually as the new notes get circulated in the market and the mismatch gets corrected, money supply will pick up.

Effects On Demand

The overall demand is expected to be affected to an extent. The demand in following areas is to be impacted particularly:

  • Consumer goods
  • Real Estate and Property
  • Gold and luxury goods
  • Automobiles (only to a certain limit)

All these mentioned sectors are expected to face certain moderation in demand from the consumer side, owing to the significant amount of cash transactions involved in these sectors.

Effects On Prices

Effects on various Economic Entities

With cash transaction lowering in the short run, until the new notes are spread widely into circulation, certain sections of the society could face short term disruptions in facilitation of their transactions. These sections are:

  • Agriculture and related sector
  • Small traders
  • SME
  • Services Sector
  • Households
  • Political Parties
  • Professionals like doctor, carpenter, utility service providers, etc.
  • Retail outlets

The nature, frequency and amounts of the commercial transactions involved with these sections of the economy necessitate cash transactions on more frequent basis.

Thus, these segments are expected to have the most significant impact post this demonetization process and the introduction of new notes in circulation.

Effects On GDP

  • The GDP formation could be impacted by this measure, with reduction in the consumption demand.
  • The impact on GDP growth is clearly going to be negative in the short run and depends to a large extent on how long the cash crunch is going to take,” Thomas Rookmaaker, Director, Fitch Asia Pacific Sovereigns Group,
  • Most of International Credit rating Agencies Cut India Growth rate .
  • GDP growth rate is likely to slow down anywhere by 0.5 percent to 2 percent from the last year GDP growth of 7.6 percent for atleast for next 6 months.
  • After a slowdown of 6-8 months the GDP is expected to grow rapidly.

Effects On Banking Sector

  • As directed by the Government, the 500 and 1000 Rupee notes which now cease to be legal tender are to be deposited or exchanged in banks (subject to certain limits).
  • This will automatically lead to more amounts being deposited in Savings and Current Account of commercial banks.
  • This in turn will enhance the liquidity position of the banks, which can be utilized further for lending purposes.
  • However, to the extent that households have held on to these funds for emergency purposes, there would be withdrawals at the second stage.

Effects On Online Transactions And Alternate Payment Methods

  • With cash transactions facing a reduction, alternative forms of payment will see a surge in demand.
  • Digital transaction systems, E wallets and apps, online transactions using E banking, usage of Plastic money (Debit and Credit Cards), etc. will definitely see substantial increase in demand.
  • This should eventually lead to strengthening of such systems and the infrastructure required.
  • In spite of the initial hiccups and disruptions in the system, eventually this change will be well assimilated and will prove positive for the economy in the long run.
  • Black money hoarders will definitely lose out, eventually boosting the formal economy in the long run.
  • Short term fall in real estate prices might benefit middle class citizens.
  • This move by the Government along with the implementation of the GST will eventually make the system more accountable and efficient.

 

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