Pros and Cons after PM’s historic Move – Demonetization of higher currency of the country

This blog will help you in your General Awareness preparation for various entrance exams and interviews.

The Indian Government undertook demonetization on November 08, 2016. For the uninitiated it looks as if this step is one of its kinds and has never been undertaken. However, demonetization or withdrawing of high denomination currency notes has been done before (1946 and 1978).

Countries implemented demonetization:

• Nigeria
• Ghana
• Pakistan
• Zimbabwe
• North Korea
• Soviet Union
• Australia
• Myanmar

There have been conjectures and looming despondency as to whether this step will help our economy in the long run or not?

Let’s weigh the positive and negative aspects of demonetization.

There are incentives worth mentioning Black Money of NO use now- If proof had to be adduced in this unflattering assessment, it lies in the fact that a sizeable chunk of the unaccounted wealth was in high denomination notes. Now, when they ceased to be legal tender their value is nothing but a piece of paper. Money kept hitherto will be weeded out, busting off Fake Currency Racket. Neighboring countries were engaged in counterfeiting our currency notes. According to estimates, this fake currency notes were pumped in our banking system through a myriad of nefarious or villainous channels. This strategy will be a serious ploy to control counterfeit notes. There are also intangible benefits which are not evident as of now but will help our country in the long run.

Cashless Economy- Transactions in all the major Western economies are done by plastic money i.e. credit and debit cards. There has been a surge in payment wallets usage and newspapers reports corroborate this fact.

Inflation Control in Real Estate-The skyrocketing prices of the real estate properties which had made housing aspirations of the working class a distant dream will spiral down eventually. A majority of the unwashed masses which had no exposure to banks and were often
shooed away from the banks are now approaching banks. Reality is, people are going to banks and maybe in the long run will be impelled to open a bank account.

However, no principal in this world can be sacrosanct. Any step taken will have its share of adverse impacts too.

Long Queues- We often under estimate that our country has a burgeoning population of 130 Crore Indians. It is palatable fact often disheartening to see people including women elderly, waiting patiently in the serpentine queues often for 4-5 hours.

Daily Wage Earners due to cash crunch in the market- People are shying away from buying stuff and are purchasing only essential commodities due to which daily wage earners employed in construction and other such activities are hardly hit.

Loss of Tax Payers’ Money- According to newspaper estimates, this activity by the Government of India has cost dearly to the state exchequers to the tune of 12.5 thousand crore.

Consumption Levels- Nothing can be farther from the truth that black money sloshed out of the economy will hit consumption incidences. There could be an impact often deflation in certain sectors of the economy since according to the  estimates of the World Bank, a quarter of tangible wealth of India is in black money.

Normal Banking Operations Suspended- Since majority of the banks workforce is involved in the exchange of notes and surveillance of operations in ATMs , so the other banking operations have been affected. However, that can be achieved once there will be enough new currencies in the market.

In the end, seeing our countrymen, despite all these difficulties yet they are standing and making sincere efforts in helping the Government in fighting corruption.

I am reminded of the beautiful lines written by Robert Frost-
The woods are lovely, dark and deep,
But I have promises to keep,
And miles to go before I sleep,
And miles to go before I sleep.

You might also like to read another GK topic : Japan and Abnomics- the way out of the abyss and, Inflation Demystified.