Demonetisation and it's Impact

On 8 November 2016, Prime Minister Narendra Modi had announced the demonetisation of old 500 and 1000 rupees notes. It was one of the major step taken by our Prime Minister in order to improve the country's economy and to bring out crores of black money hidden in our country and stop the illegal funding of terrorist activity.Prime Minister had announced the denomination of 500 and 1000 rupees note would cease of legal tender from 9 November 2016.The whole country was stunned and especially people with black money.

People had to deposit the banned notes in their possession by 30 December 2016, while the old notes were being replaced by new 500 and 2000 rupees note. Since the announcement people started crowding around banks to deposit the notes, there were limits imposed on how much money could be exchanged.Initially, people would exchange only rupees 4000 per person from 8 to 13 November , then it was increased to rupees 4500 per person from 14 to 17 November ,but it was then decreased to rupees 2000 per person from 18 November .Finally exchange of old notes was stopped from 25 November.Cash withdrawals from bank accounts was limited to 10,000 rupees per day and 20,000 rupees per week.Withdrawals from ATM was also restricted with rupees 2000 as the limit per day till 14 November and then rupees 2500 till 31 December, the limit was increased to rupees 4500 from 1 January and to rupees 10,000 from 16 January.Finally all withdrawal limits were removed on 13 March.

People had to spend lot of time standing in lines since withdrawal limits were there people had to repeatedly visit banks, a thing which would generally take 10 to 15 minutes would then take many hours. So a lot of inconvenience was caused to people, even so people supported this movement and  cooperated with the Government.However, the people who suffered the most were bank employees since they had no time to rest.It was hectic for two months. Some people even had to be made aware about this movement, because such people were panicked and didn't know what to do with the banned notes and avoid from being cheated .Due to demonetisation the economy came to a standstill,also people with low wages went jobless or their daily wages were not being paid as the employers were unable to provide cash.The Government had to afford printing of  new 2000 rupee notes and also it would be difficult to transact business in such high currency note.People even discarded the banned notes which again would hurt the economy.

Since it was a step taken to curb flowing of black money, which it was successful in doing so to some extent.People had to find ways to hide their black money.A huge amount of gold purchases were being made using banned notes.Even the notes were gotten rid of by making huge donations to temples. Multiple bank transactions were noticed as people were circumventing black money into different bank branches and accounts.Many establishments were doing backdated accounting to launder money.Even after introduction of new notes, some of the notes were already found to be black and methods were implemented to seize the new notes.

The Government was successful in recovering a huge portion of black money. Income tax officials raided banks and caught bank officials laundering money by making gold purchases.People were marked with ink to make sure that exchange of notes is done only once by that person, since some people were being paid to store black money in their accounts. Establishments making back-dated entries were raided by the Income tax officials, to stop money laundering.

The Government would be able to back track the use of unaccounted cash and detect money laundering.The ban on high currency notes would make it difficult to launder money since they are easy to detect.

Demonetisation had it's own advantages and disadvantages.The idea about banning old notes was supported by many but needed to produce the expected results. Results were obtained but not to the extent which were predicted.However it provided situation to present the idea of cashless economy.Due to demonetisation people had to find alternative means of transaction, and it was presented with the idea of electronic cash.People started dealing with electronic cash, several applications like PayTM,etc, allowed people to deal in electronic cash.People more often used credit or debit cards to make payments and even started online net banking to pay their bills.I think even we must start dealing in electronic cash and support our Prime Minister's idea of cashless society.