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In IndiaDemonetization has taken placethree times. These are as follows:o 12 th January, 1946Being of the time of8independence we do not have much data available on this demonetization. But,as per the facts provided in the RBI’s first history volume we come to know thatthe main objective behind implementing this move was to counter the blackmarket in India. As per the ordinance issued, notes worth Rs. 500, Rs. 1000, Rs.10,000 ceased to be the legal tender. The move is said to have failed because outof a total of Rs. 143.07 crore, Rs. 134.9 got successfully replaced. Thus, effectivelyit was just Rs. 9 crore which got demonetized. People were given a time period of10 days to get the old currency exchanged.o 16 th January, 1978Even this time the currency was demonetized to curb corruption and black moneyin the Indian Market. It was implemented under the leadership of Morarji Desai,Prime Minister of the nation at the time of time of this move. This time, notes ofRs. 500, Rs, 1000 and Rs. 10,000 were discontinued with. As a contradiction tothe 1946 event, people were provided with just 3 days to carry out the exchangeof old currency. Approximately Rs. 73 crore was demonetized.o 8th November, 2016In India, on the night of November 8 th , Prime Minister Narendra Modi made animpromptu appearance on live national media declaring 86% of the country’swealth to be demonetized. The high value denominations of Rs 500 & 1000 wereturned into mere pieces of paper.9Objectives of the 2016 Indian DemonetizationThe 2016 demonetization was a necessary step for various reasons-Terrorism Funding- India is highly prone to terror attacks from various anti-social groupsoperating both within and outside the country. All terrorist organizations procure theirfunds in cash, in order to ensure that there is no paper or digital trail. Thusdemonetization ensured that all the currency held with the terrorist organizationswould be valueless.Black Money- Many people in our country hide their money illegally in form of blackmoney. Thus, after demonetization, these people would either have to abandon theirmoney or report it to the authorities, hence making the income taxable.Digitization of Currency- In India, many of the poor lower class citizens are oppressedbecause of the presence of middlemen. Digitization helps people to take control of theirown finances. Moreover, it helps to document the money trail.Corruption- Demonetization also ensures a reduction in corruption, since peoplewouldn’t be in any position to make any underhand transaction.Human Trafficking and other Crimes- Much like terrorism, most criminal activities areundertaken in cash form. Thus, demonetization also reduces the availability of cashwhich in turn leads to curbing of such illegal activities.10Key Features of the 2016 Indian DemonetizationThe currency was demonetized under the leadership of Mr. Narendra Modi, theincumbent Prime Minister of India. Some of its key features are:? Currency notes worth Rs. 500 and Rs. 1000 ceased to be legal tender from 1 stJanuary, 2017? Physical notes comprised of about 90% of the total money supply, while 86%of the money supply was in denomination of 500 and 1000 rupee notes? Government gave a time period of 50 days for exchange of the currency? The limit for exchanging the notes over the counter was set up at:o Rs. 4000 till 13 Novembero Rs. 4500 till 17 Novembero Rs. 2000 till 25 November and then no exchange? Petrol, CNG and gas stations, government hospitals, railway and airlinebooking counters, state-government recognised dairies and ration stores,and crematoriums were allowed to accept the banned ?500 and ?1,000bank notes until December 2, 2016? As per the government’s reports 97% of the demonetized currency has beendeposited in the banks11Impact of the 2016 Indian DemonetizationEconomyIndia’s GDP was predicted to grow at 8% in FY2017. Right after demonetization, analystspredicted a slowdown in the growth rate at 5.5-6%. This was because 40% of theeconomy constituted of the informal sector, which was the most impacted in this case.On the contrary, the latest data shows that the GDP is still growing at 7%. This showsthat even though there has been an impact, it hasn’t been as severe as it was thought tobe.EmploymentThe move has had no impact on the top and the middle level workers. In labourintensive sectors, there have been some layoffs among the lower level wage workers.This has been done in order for the firms to maintain their ex ante profit targets.Consumer SpendingDemonetization has negatively impacted consumption in the economy. Consumtionforms a big chunk of GDP. According to Nielsen, FMCG sales have dropped by 30-40% in12November and December. Furthermore, impulse buys in stores have also droppedsignificantly.MSMEsA majority of MSMEs exist in the rural areas. A majority of these MSMEs have a turnoverof just a few lakhs. Furthermore, rural areas have uneven distribution of banks andfinancial institutions. Thus, demonetization has forced many such MSMEs to scale downor, in worse cases, cease their operations.13Real EstateDemonetization has brought down the real estate market. This is primarily because theunderhand deals that were usually the norm, are no more feasible due to shortage ofcash. Furthermore, the demand for houses have also dropped almost 30%.AgricultureThis sector usually has a high percentage of cash transactions. Thus, it is going to beaffected in the short run. But at the same time, the government has also brought aboutvarious benefits to the farmers.

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