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Few days ago, I was watching a news channel in which two spokesman of different political party were debating with reference to demonetisation. Probably, one of them was from ruling party and other one was from opposition party. They were discussing that how does Demonetisation which was applied in 2016 affected the Indian economy. I  thought it may be a great topic for discussion, so what do you think about it? 
Demonetisation is a process of clearing a currency unit of its status as valid tender. It takes place whenever there is a change of any national currency. There are a lot of countries who have occasionally applied demonetisation in their country , some of them successfully managed it and in some countries , it has been proved a failure.The major difference between success and failure of it's just one word and it's 'Management'.

The countries who tried applying demonetisation are-

  • United States(1873 and 1969)
  •  India (1978 and 2016)
  • Ghana (1982)
  • Nigeria (1984)
  • Israel (1985)
  • Myanmar (1987)
  • Soviet Union (1991)
  • Zaire (1993)
  • Australia (1996)
  • Ecuador (2000)
  • European Union (2002)
  • Iraq (2003)
  • North Korea (2010)
  • Zimbabwe (2015)
  • Pakistan (2016)
  • Venezuela (2016)
There are some big countries such as China, France,Italy, Japan etc. have never tried to avail demonetisation in their country, one of the main reason for not availing it in their countries that it has some negative impacts in the economy of the country.Especially the department of Agriculture and industry had its worst impact.    

When Demonetisation was imposed by the US president Richard Nixon in 1969, there had a profound influence on USA's economy. They produced excellent results after declaring all bills above $100 null and void in USA to restrict the existence of black money in the country. This step reimposed the nation's gleam.This was a great moment in USA's monetary history because after few years of availing demonetisation there had a great increment in the GDP of the nation.

  But every coin has two sides. In one hand Demonetisation has awesome profits but in other hand it has also have a lot of downsides. Some common benefits and pitfalls of imposing Demonetisation are-:

Advantages of Demonetisation:

  • Demonetisation is a valiant and revolutionary action that can be taken by government to curb black money and this can deeply affect the parallel economy of the country.Pockets with black can be easily recognised with this move.
  • Long-term benefits for the growth of GDP of the country can exceed the short-term intermediate impact.   
  • Extracting highest currency notes out of the economy have a serious effect on the fake currency gangs.Thus, this can put an end to various criminal funding such as terror funding. 
  •  A Transaction system of the nation could be changed by demonetisation. For example , in India when it was applied in 2016, the online transaction came into effect and now most of the people preferring cashless system instead of coins or notes.
  • The Startups could have long term  positive bang by demonetisation as the new startup that can be established on the basis of the changes that happened after demonetisation in the country.
  • As the people deposits their money in the banks their savings increases and the good amount of tax revenue that can be collected by the government and can be used for the development of country and betterment of society.

Drawbacks of Demonetisation:

  • Demonetisation rises Liquidity problem for some time so, people find it difficult to get sufficient amount to fulfil their basic needs.
  • Withdrawal of highest currency notes reduces the growth rate of the country. Demonetisation also reduces expenditure pattern, income, investment etc.
  • Shortage of cash occurs in the country which unfortunately affect the behaviour of the people which results into going down of volume of trade.
  • The main reason for applying Demonetisation is to suppress the black money but sometimes, only a small portion of black money is stored in the form of cash by the people and most of the black money is kept in the form of land, revenue and jewelries etc. which leads to the failure of the action.
  • The lower class family and lower middle class family usually depends on the cash for their daily uses but Demonetisation make them uncomfortable and due to shortage of cash their financial conditions becomes unstable.  

    Demonetisation is a absolutely right option for receiving black money, taxes etc. in the country .It also works in reducing corruption somewhere but it rises too many problems too. It mainly affects Real Estate, Property, Jewellery, Banks, Hospitality and tourism, Luxury items, Automobiles, retail, and agriculture sector of the country.

 You can also share your views in the comment section about demonetisation should be applied or not. In my view, it should regularly be applied after a period of 10 or 15 years. It is also written in the very famous Hindu Scripture " Shrimad Bhagvat Geeta" that-:

     परिवर्तन ही संसार का नियम है |

which means-

    Change is the rule of the life.



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