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Pros and Cons of India's Demonetization

Prime Minister Modi announced the demonetization of 500 and 1000 rupee notes in India on November 8th, 2016, the largest reform in independent India aimed at tackling black money, money laundering, and fake currency. The document discusses both the potential pros and cons of demonetization on the Indian economy. The potential pros include reducing black money, increasing tax payments, and promoting digital transactions. However, the cons may include problems exchanging currency that hurt the middle class and poor, a short-term drop in GDP, negative impacts on the agricultural sector, and lack of digital infrastructure in rural areas.

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5 views1 page

Pros and Cons of India's Demonetization

Prime Minister Modi announced the demonetization of 500 and 1000 rupee notes in India on November 8th, 2016, the largest reform in independent India aimed at tackling black money, money laundering, and fake currency. The document discusses both the potential pros and cons of demonetization on the Indian economy. The potential pros include reducing black money, increasing tax payments, and promoting digital transactions. However, the cons may include problems exchanging currency that hurt the middle class and poor, a short-term drop in GDP, negative impacts on the agricultural sector, and lack of digital infrastructure in rural areas.

Uploaded by

Shyam
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Demonetization has hit the Indian economy on Nov.

8th 2016, with an


announcement from Prime minster Modi banning old currency notes of 500 and
1000 rs. Till date this has been the biggest reform taken in Independent India to
tackle the menaces of Black Money, Money Laundering & Fake Currency. Any major
decision relating to currency would definitely have its implications in Short term,
Medium term as Long Term on the Economy.

The implications hit the economies from micro to macro levels right from a farmer
in a remote village, middle class family to Business giants. Let us analyze these
Pros and Cons of Demonetization in Indian Economy in detail.

Pros of Demonetization:

Will reduce the amount of Black money


Will Increase the inflow of the money in the economy (Black money
getting accounted)
Will reduce the Fake currency and tightens funding the businesses
based on Fake currency like drug mafia etc.
Terror Funding will get reduce
Will Increase the GDP in long term
Will help tackle higher inflation in the long term
Promoting digital economy brought in more transparency
Increase in tax payment

Cons of Demonetization:

Problem in exchanging notes halting the transactions Hitting


Middle class and poorer population suffering the most
Hit economy for two quarters at least Short Term & Medium Term
fall of GDP
Will hit agricultural sector Lack of currency for agricultural loans
and lowest money circulation in rural areas
Less agricultural production will further result in inflation and high
price of food grains.
Lack of digital payment facilities in rural areas
Demonetization made banks & ATMs dysfunctional causing more
havoc in public life
Hit marriages and property deals and registrations
Did not curb the parallel black economy completely. The very
purpose of demonetization not realized.
Surge in internet banking and digital transactions prone to hacking
and online frauds
Release of 2000 Rs note actually proven counter-productive to the
efforts of curbing Black Money

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