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What is demonetization and its impact? – with Pros and Cons

Demonetization is the method of discontinuing using a particular foreign money denomination as authorized tender. It usually entails the withdrawal of present notes and cash from circulation and their alternative with new notes or cash. The principle goal of demonetization is to fight points similar to inflation, black cash, and corruption.

Affect of Demonetization

The impression of demonetization on the Indian economic system was combined. On one hand, it helped in lowering the circulation of black cash and counterfeit foreign money. It additionally led to a rise within the deposit of cash in banks, as individuals have been required to deposit their previous notes in banks to alternate them for brand new notes.

This led to a rise within the cash provide and a lower in rates of interest. However, it brought on a money crunch, as there was a scarcity of recent notes out there. This led to lengthy queues outdoors banks and ATMs, and many individuals have been unable to entry their very own cash.

It brought on a slowdown within the economic system, as companies that relied on money transactions have been affected and job losses as nicely. General, the impression of demonetization on the Indian economic system was important, nevertheless it’s tough to quantify the online impact. The short-term adverse impacts have been felt by many individuals and companies, however the long-term advantages are nonetheless being evaluated.

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Execs of demonetization embody:

  1. Curbing black cash: Demonetization may also help in lowering the circulation of black cash, which is cash earned via unlawful or illegitimate means.
  2. Counterfeit foreign money: It helps in lowering the circulation of counterfeit foreign money, which is a significant downside in lots of international locations.
  3. Improve in deposit: It results in a rise within the deposit of cash in banks, as individuals are required to deposit their previous notes in banks to alternate them for brand new notes. This results in a rise within the cash provide and a lower in rates of interest.
  4. Cashless economic system: It helps in shifting the nation in the direction of a cashless economic system.

Cons of demonetization embody:

  1. Money crunch: It causes a money crunch, as there’s a scarcity of recent notes out there. This results in lengthy queues outdoors banks and ATMs, and many individuals are unable to entry their very own cash.
  2. Slowdown in economic system: It causes a slowdown within the economic system, as companies that depend on money transactions are affected.
  3. Job losses: It causes job losses, as many small and casual companies are affected by the money crunch.
  4. Inconvenience to public: It causes inconvenience to the general public, as many individuals are unable to entry their very own cash for a number of weeks.

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