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Demonetisation of rupees

The document discusses the Indian government's decision to demonetize Rs. 500 and Rs. 1000 currency notes. It provides background on the increase in fake currency and black money fueling corruption. The government aims to curb these issues by removing the higher denomination notes from circulation. While this creates short-term hardship, the long-term goals are to bring transparency, reduce corruption, and benefit ordinary citizens and the economy. The impacts on various sectors and pros and cons are debated.

Economy & Finance◦
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Content  Need of the study  Introduction  Why this move has been taken  About Demonitisation  Under this Scheme  Impact on various Sector  Pros and Cons  Conclusion Bibliography
Need of the study  To know the motive behind this move. To know the reason as to why this step has been taken by the government.  To know it’s impact on Indian Economy in long run.  To know it’s pros and cons.
Introduction In an important move, the Government of India declared that the five hundred and one thousand rupee notes will no longer be legal tender from midnight, 8th November 2016. The RBI will issue Two thousand rupee notes and new notes of Five hundred rupees which will be placed in circulation from 10th November 2016. Notes of one hundred, fifty, twenty, ten, five, two and one rupee will remain legal tender and will remain unaffected by this decision. This move is expected to cleanse the formal economic system and discard black money from the same.
In a bid to cut corruption, the Prime Minister of India, Mr. Narendra Modi has announced the ban on Rs. 1000 and Rs. 500 currency notes. What is being an unpredictable move by Modi, he announced during his special address to the nation that the currency notes of Rs. 500 and Rs. 1000 will be illegal starting mid night of 8th of November 2016. "Currency notes of Rs 1,000 and Rs 500 will be just paper with no value, " announced by PM Modi. WHY THIS MOVE ??
•This move from the Indian Prime Minster is his strike against the ever increasing black money in our country. • While this announcement was met with shock and confusion by many, there are others who termed this as the Surgical Strike on Black Money. • Let us have a look at the reasons for the ban and how this can affect our economy going forward.
• India has seen the increase in the fake currency notes of higher denomination circulated widely. • For all those ordinary people, the fake notes look much similar to the genuine ones even when the security feature is not copied. • Such fake notes are used for illegal and anti- national activities. • The currency notes of high denomination are used by terrorists and to hoard the black money into our nation.
CONTINUED........ • As the economy of India is cash based, such circulation of fake currency notes has become a menace. • So, to contain the increase in fake notes and black money, the scheme to ban Rs. 500 and Rs. 1000 currency notes has been introduced by the government.
UNDER THIS SCHEME As per this scheme the legal tender character to the currency notes in Rs. 500 and Rs. 1000 denominations are withdrawn. • Due to this, the old high denomination notes are invalid and cannot be used for any transactions nor can be stored as a value for use in the future.
These notes can now be exchanged for the same value of money at the RBI offices or at various bank and post offices. People can deposit their old currency till the 30th of December 2016 in their respective bank accounts. • Most of the ATMs across the nation are closed on the 9th and 10th of November and the withdrawal limit from the 11th of November is Rs. 2000 and the same would be increased to Rs. 4000 per day. CONTINUED.....
While the decision taken by the government was indeed a bold one, both the bankers and economists do feel that this ban would for sure have a ripple effect on both gold and real estate transactions as these are the instruments that are used by majority of individuals to hoard the black money they have.
• Share markets will for sure see the impact with the prices of the shares shooting higher. A negative impact can be seen on the cash focused sectors in the stock market. This can trigger to all round selling bringing down the indices from their present levels. • This move will also impact and lower the political spending during elections especially in states like Punjab and UP where huge cash is spent during elections.
WHAT’S GOOD ABOUT THIS MOVE ??
•First, people who have a lot of cash, legally earned, will deposit it in the bank. •Credit (loans) will become easier and interest rates may come down. More loans given out increases broad money supply and creates inflation. •On a long-term basis the government’s decision to curb black money would reduce corruption and bring transparency into the sector.
Continued…. •The move will benefit the poor, middle class and aspirational middle class by increasing opportunity and bringing real estate and higher education within their reach again. •The government’s move will benefit companies in the cashless economy. •Rupee will strengthen as the time passes. Inflation will go down which will benefit poor and middle class people. .
CONTINUED… •Investments in gold and Jewellries will increase as trust on currency will go down. • More people will try to convert paper into gold. It will eventually increase investment in the government’s gold monetization scheme. •More and more businesses will be organized those who accept paper money only such as small jewelers, hotels etc. Funding for arms, smuggling, terrorism will take a blow. This is most important advantage to the country.
Who will be affected by this move?
•The lower/middle class will not find it tough to account for or exchange the currency. •The real fear will be for those who have unaccounted money. •Land and property prices, particularly those of luxury homes, are likely to come down in the short to medium term as a result of this move. •The demand for gold and other investment options such as diamonds and silver may shoot through the roof until the deadline, and beyond it.
What RBI and world bank says about Indian economy.! In the last two and a half years with the support of 125 crore Indians, India has become the “bright spot” in the global economy. It is not just we who are saying this; it is being stated by the International Monetary Fund and the World Bank.
Conclusion The government’s move is bold in its intent and massive in its measure. While the intent is clear, the implementation and impact is yet to be seen. One thing is sure though – the Indian economy just had a massive disruption overnight.
PM’S ADDRESS THE NATION “Let us ignore the temporary hardship Let us join this festival of integrity and credibility Let us enable coming generations to live their lives with dignity Let us fight corruption and black money Let us ensure that the nation’s wealth benefits the poor Let us enable law-abiding citizens to get their due share.
Bibliography  http://www.insightsonindia.com/2016/11/09/insights- editorial-rs-500-rs-1000-notes-no-longer-legal-tender/ http://www.pmindia.gov.in/ thewire.in/78694/paper-money-ban-rs-500-rs-1000-notes- explained/ www.insightsonindia.com/.../6-discuss-demonetization-rs- 500-rs-1000-notes-impact-t.. http://finmin.nic.in/press_room/2016/press_cancellation_high_ denomination_notes.pdf http://finmin.nic.in/