Recently, on 8 November, 6 years of demonetisation were completed. We will therefore assess the journey of demonetisation over several years and its effects on various sectors in the economy.
Demonetization refers to a procedure known as the process of stripping a currency unit of its status for use as legal tender.
The main objective of demonetisation is to wipe out black money, eliminate fake notes and create a cashless economy by promoting digital transactions.
Demonetization has been implemented twice in India – 1946 and 1978. For the first time currency restriction happened in 1946. At this time the 1,000 and 10,000 rupee notes were removed from circulation.
If we talk about the floating of currency in the market, then according to the definition of the Reserve Bank of India, the currency with the public is calculated after deducting cash from the total currency in circulation with the banks. Money in circulation refers to cash or currency within a country that is physically used to conduct transactions between consumers and businesses.
Why did the government need to try such a stand?…. If the context of this question is understood, it has many implications. Actually, due to excessive currency circulation in the market, there was a glut of notes. According to noted economist Anil Bokil, Rs 500 and Rs 1000 notes, when demonetised, made up 86 per cent of the total circulation and were rising.
If demonetisation had not happened in 2016, in the next two-four years, the circulation of old Rs 500 and Rs 1000 notes would have reached 90 to 95 percent, bringing the country’s economy to a standstill. was given and the government introduced new 2000 rupee notes.
Black money was also a big issue. In fact, the biggest issue in the then circumstances was to curb black money. Black money refers to cash that is not accounted for in the banking system or cash on which taxes have not been paid to the state. Demonetisation will make circulation of black money more difficult.
Along with this, it was also adopted to increase digitization. After demonetisation, there was a significant increase in digital payments, especially as the government and banking regulator worked to transform India into a “less cash economy”.
If we look at the effect of this on the economy, formalization of the economy due to demonetization, increase in GST collection, convenience of cashless transactions during lockdown, helped in economic recovery after the epidemic, Indian rupee has also strengthened.
( DIRECTOR – OJAANK IAS )