Why did demonetization happen, when did it happen and why was it needed?
What is Demonetization?
Demonetization means the government banning the use of large-denomination notes so that they can be used for any purpose. There is no way to do business with them, and nothing can be bought. Like, On November 8, 2016, at 8 pm, Prime Minister Narendra Modi unexpectedly withdrew Rs 500 and Rs 1000 notes from their legal tender. From that night, Rs 500 and Rs 1000 notes remained as pieces of paper.
When did demonetization happen in India? –
3 times in India –
Before 2016, demonetization was implemented twice in the country. The British government demonetized currency for the first time in 1946. This was followed by demonetization in 1978 as well.
In 1946, it was decided to discontinue the 500, 1000, and 10,000 Rupees.
First demonetization –
In the 1970s, the Wanchoo Committee on Direct Tax Investigation proposed demonetization, but the proposal became public, so it could not be.
Second Demonetization –
Implemented. In January 1978, the Janata Party government of Morarji Desai enacted a law banning 1000, 5000, and 10,000 Indian rupee notes. However, the then RBI governor IG Patel opposed this demonetization.
Third Demonetisation –
In India in 2005, the Congress-led government of Manmohan Singh discontinued the old Rs 500 notes.
In 2016, the Modi government decided to withdraw the 500 and 1000 rupee notes from circulation. The circulation of these two notes in the Indian economy was about to 86 percent. These notes were the most used in the market.
Why was the decision of demonetization taken? -
Modi's government gave many reasons for bringing demonetization to India. The first step in fighting corruption was to eliminate black money. Also, the fake ones in circulation are fake.
What was the benefit? –
There is no clear evidence that demonetization is beneficial. However, the government argues that, after demonetization, tax collections increased and the money system used for black money became less common. According to RBI data, more than 99% of the 500 and 1000 old bills that were removed during the demonetization process were returned to the bank.
The impact of demonetization on the economy –
Why did the Indian government decide to demonetize the currency? This question must have been in everyone’s mind.
Demonetisation or demonetization will be needed in any country when there is an increase in the trade of black money and counterfeit notes. In situations like this, people are more likely to make cash transactions to avoid paying taxes – mainly those with large bills. Democratization can be used to curb corruption, black gold, counterfeit notes, inflation, and terrorist activities.
Economists believe that some changes should be made to the notes every five years for the sake of safety, although the ban on banknotes is a big change in itself. Before the demonetization of 2016, the number of counterfeit notes increased so much that even banks and ATMs were getting the news. After investigation, it was found that these fake notes were similar to the real ones.
Demonetisation had put the country on the line –
The decision of demonetization had a huge impact on everyone. There was panic in the whole country. The bank has given permission to exchange old notes and has fixed a limit on how many notes can be exchanged in a day.
Damage to small industries -
The impact of demonetization is still being felt by the people. The biggest impact of demonetization was on those industries which used maximum cash. This is an example of a text that is difficult to read. The text is written in a hard-to-read font, and the text is full of difficult-to-understand symbols.
Essence –
Even before 2016, there were two democracies in the country. For the first time in 1946, the British government did demonetization. After this, demonetization was also done in 1978.
On November 8, 2016, Prime Minister Narendra Modi made an unexpected announcement to the nation: high denomination notes of Rs 500 and Rs 1000 will no longer be legal tender. Demonetisation is a term used to describe the removal of currency from circulation. Used to describe the process.
Demonetization means banning or restricting the use of high denomination banknotes by the government in any country so that they become worthless. Nothing can be traded or bought from them.
There is no way to do business with them, and nothing can be bought from them. In this process, the old currency is replaced with the new currency. This is a way to control black money and prevent the formation of counterfeit currency. Does the government have the right to withdraw notes? When new notes and coins are replaced by old notes and coins, it is called demonetization.
By Sandeep Kumar | June 25th, 2022 | Writer at Gurugrah_Blogs.
