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SHASHI JAISWAL, profile picture
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Demonetisationsation :A master Stroke

Demonetization refers to the discontinuation of existing currency, introducing new currency to transition to a more cashless economy, which is expected to reduce black money and curb corruption. While it has led to increased online transactions and greater tax compliance, its effectiveness against black money is limited as most is held in physical assets, and it has also caused short-term liquidity issues. The overall impact on the economy is mixed, with potential long-term benefits of increased transparency and reduced counterfeit currency, but immediate challenges for everyday financial activities.

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What is demonetization??? EFFECTS ON BLACK MARKITING???
 Demonetization refers to discontinuing of current currency units and replacing those currency units with new currency units.  It is a major decision and it impacts all the citizens of the country because overnight all the money you have become a piece of paper  which becomes worth if you do not exchange it with new currency units or deposit it in the banks.
 Demonetization will help speed the transition of a predominantly cash economy to a cashless one, nandan nilekani, former chairman, unique identification authority of india.  Only people need to know aadhar no. And with help of thumb impression and iris transaction possible  Online transaction has increased over the period. Transactions have grown 20 times in six years to 2016, a process likely to be greatly boosted by demonetization.  Now payments through mobile phones linked to bank accounts through a unique number is done.
 It is a known fact that a parallel black money economy exists in india. However, what needs to be understood here is that only 6% of the total black money exists in the form of cash.  12% black money destroyed by demonetization i.e about 4 lakhcrores pf black money had been destroyed.  The balance is in the form of benami properties and gold. Interestingly, there has been a major surge in the import of gold since 9/11.  Bad debts and disproportionate assets acquired through corrupt means by absconders like vijay malaya and lalit modi are far from being recovered.
 The most effective way to curb corruption is not by attacking the demand side of it, but the supply side of corruption.  The biggest reason for corruption to multiply in our country is the requirement of funding of political parties. The same indirectly, pressurizes the executive also to become corrupt.  The big corporate houses are free to support political parties by paying in tax exempted money as party funds. Naturally, they would then demand favors from the government in return, ushering in corruption.  Secondly, the big black money-hoarders would have already devised means to convert their black money into white and the new Rs 2000 notes would only facilitate fresh hoarding.  Ulterior Motives of Government being Highlighted by Opposition
 Only 1% of india’s population pay income tax, according to income tax department data.  It is boon for honest tax payee and ban for dishonest one.  Most of the businessmen who have been hiding some income are ready to pay advance tax as current year's income. Tax payers who have been hiding some income can come forward to declare income and pay tax on the same.
 It is a well known fact that the terrorists do not deal in cash, but invariably their funding is done through electronic transfers.  The terror organisations utilise hawala route, mainly through fake/ shell companies operating abroad to draw funds.  Demonetisation of the currency is an effective step to stop terror funding.  Terrorist from other countries comes to india and create blast though use of black money .  Thus, unless we have more stringent means to monitor electronic banking and tackle black money stashed in tax heavens, we will not be able to stop funding of terror outfits.  There is a un charter on preventive steps against terror funding that could be adopted. Demonetisation of the currency is an effective step to stop terror funding.
 The quantum of counterfeit currency in the system is a miniscule 0.028% of the total currency in circulation.  Moreover, there is no guarantee that the counterfeits of the new currency cannot be prepared. In fact, a counterfeit of Rs 2000 has been already recovered in Bangalore two days ago.  This massive exercise to print new currency at a colossal cost to fish out just 0.028% of counterfeit currency that can again be printed appears to be counterproductive.
EFFECT ON GDP  ICICI bank chief “Chandan Kochhar ” had announced that the demonetisation has helped in decreasing inflamation.  There are many types of financial transactions that are not considered as an economic activity. As a result of demonetisation, the ambit of economic activity will grow and add to the GDP
 Easier assessibity to market product  Cheaper rates  Chances of fraud/fake currency reduced  Easy record keeping  Better offers
 Absence of intermediate denominations like Rs 500 and Rs 1000 will reduce the utility of Rs 2000. Effectively, this will make Rs 2000 less useful as a transaction currency though it can be a store value denomination  Demonetization is not a big disaster like global banking sector crisis of 2007; but at the same time, it will act as a liquidity shock that disturbs economic activities  Liquidity crunch (short term effect): liquidity shock means people are not able to get sufficient volume of popular denomination especially Rs 500. This currency unit is the favorable denomination in daily life  Impact on black money: Only a small portion of black money is actually stored in the form of cash. Usually, black income is kept in the form of physical assets like gold, land, buildings etc. Hence the amount of black money countered by demonetization depend upon the amount of black money held in the form of cash and it will be smaller than expected.  Impact on counterfeit currency: the real impact will be on counterfeit/fake currency as its circulation will be checked after this exercise  Demonetization as a cleaning exercise may produce several good things in the economy. The unmeasurable benefits of having more transparency and reduced volume of black money activities can be pointed as long term benefits.
DEMONETIZATION EFFECT ON ASSEMBLY ELECTION  After demonetization, BJP gained significantly in local elections & by polls in Maharashtra, Gujarat, Rajasthan & MP. Among the losers will be SP & BSP . Congress will be a non-player may end up with duck. BJP will win overwhelmingly.  Although the political forces have routed their anger at the NDA government, the NDA had given their poll agenda before the Assembly elections in 2014, BJP may have already gathered the trust of the people with its demonetisation move.  "It will definitely have some impact on free flow of money in elections but I don't think it will curb the whole menace. We all know that in Uttar Pradesh and Punjab elections, money plays a big role. There will be some control after the decision,“ told Quraishi ,Former Chief Election Commissioner.
 Inflation decrease this is the reduction in cost of petrol diesel and conumer goods which has already happened  RBI economy increases ….Results in a stronger economy and attracts foreign investment  Reduction in real estate prices and interests in house loans  Fake notes are much controlled and circulation is less  Terrorists don't get funded by fake notes  Makes the economy stronger to withstand any economic recession  Black money is reduced not removed there still a few loop holes in the law and our banking sector I believe.
How transaction will simplyfy
 The recent announcement of mr. Arun jaitley that the proceeds of tax collected during the demonetization drive will be used for the welfare of the poor is a welcome measure .  The demonetization is definitely a good step, however, the planning and execution of the exercise is seriously flawed.  It is sure to have some positive affects at least in the short and medium terms. However, I sincerely hope that the gruelling exercise is over soon and life comes back to normal for common people like us.  The advantages are much dominating and it will be in the long term interest of our country comfortably outweighing the disadvantages.  Government need to take all the necessary steps so as to ensure that there will be a smooth flow of currency exchanges.  It would turn into chaos if government takes no necessary steps to circulate money correctly. It will make a massive change in our economy.  We congratulate the entire government and those hidden brains of our democracy who brought this decision.  Overall, demonetization is a bold step towards good governance and transparency.
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