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Dec 2, 2016

Essay on Demonitization ( नोट बंदी) in India

This is a complete personal view. It is not in support to anybody or any organisation etc. It is an article completely in the interest of the nation. You can give your views in the comment box.

Demonitisation is a very good tool to arrest black money. It was implemented with a very good intention to make India free of parallel black economy and black money. But the actual problem was in implementation. A lot of homework was needed for taking into account few critical issues of common people like critical illness, small business, old age people's concern , farmer's issues, inefficiency of rural banks etc. It is because demonitasation brought a phobia of non-eligibility of old currencies in hospital and other vital shops even after permission of the government for critical issues of common people. It is because government cannot manage each and every person. It has been noticed that many institutions and medical shops have denied to accept old currency. It is also because these person or institution might had black money and were unable to accept more old currencies. These are the hidden issues that must be thought before theoretical homework. A macro and micro assessment were needed for ground level problems.

As far as I know, the decision may brighten the future of nation, but it`s social benefit and loss cannot be calculated right now. And it is too early to produce data of benefit or loss. After 31st December the picture will be somewhat clear. A big support will be needed to correct the problems of small businessmen facing the monitory transaction.

Demonitisation ( नोट बंदी ) in more details:
Essay on Demonitization in India

Undeclared income is usually obtained through illegal means or is the direct result of corruption. A swift crackdown on this can lead to a weeding out of corruption on a nationwide scale, The government also mentioned this was a move to promote digital transactions and e-wallets so as to improve surveillance using economic transactions. A credit or debit card or ewallet transactions can be monitored via the banking computers and this can give the government precise data on what a person doing at different times of the day helping them identify potential criminals before they commit a crime. Separating anti-government and anti-national voices would be a key part of this surveillance. Any activity that tries to impact nationalistic sentiments should not be allowed but dissent is as much a part of democracy as elections and discouraging constructive criticism is not an acceptable practice in any democratic setup.

On November 8th 2016 the prime minister of India, announced on television that ₹1000 and ₹500 notes will no longer be legal tender from midnight that day. The timing of the announcement was impeccable, it was announced at night 8 o'clock on prime time television just as the news of Donald Trump’s election victory in the United States of America was filtering through. As soon as the announcement was made, questions were raised about the legality of the issue. The paper currency of a country is given its value by the gold reserves maintained by the Reserve Bank of the country. This reserve gives the reserve bank governor the power to distribute legal documents to the citizens that we refer to as currency notes. It is ultimately the decision of the reserve bank governor if a currency can be legal tender or not and the Prime Minister’s popularity made him the perfect person to announce this move to the country. In his announcement the prime minister said this is a move to combat undeclared income and counterfeit currency.

Demonetization was a major move in keeping with the Government’s promise to tax all undeclared assets in the nation. Over the course of the years the government had asked citizens to declare their undeclared assets with increasing fines the later they declared it. The fines levied increased rapidly during the course of the last two years with 10% tax being levied at the start of the tenure now increasing to 45% tax for those who declare undeclared assets by September 2017. The prime minister in his speech announcing demonetization said that 1.25 lakh crore rupees of black money had been already retrieved. A retrospective look on whether demonetisation was necessary is an exercise of futility. What is more significant is understanding the impact it will have on the economic, social and political situation in the country. ₹1000 and ₹500 notes made up roughly 85% of the circulating cash in the country. An overnight announcement giving no time for preparation left a large percentage of the country cashless. This threw the banks into crisis control mode with long lines being the norm in every branch. There were numerous instances of crowds becoming uncontrollable and causing damage to bank property. The biggest impact was the non-functioning of ATMs as they were not recalibrated for the new notes. The Reserve Bank had instructed the banks to stock ATMs with 100 rupee notes. Prime Minister gave strong decision to not to levy toll tax to keep the economy on right track. In real sense it helped a lot to the road transport. The old currencies validation at Indian Railway was also a big support to the railway transport. These decisions were very much effective to save the foundation of our economy. These decisions are praiseworthy.

The immediate after effect of demonetization was a cash crunch like never before. The lines at banks meant that essential human resource was wasted standing in queues and this meant the economy was almost at a standstill. Most of the transactions that would have happened on a daily basis ceased almost completely. In rural regions essential services including health care was delayed and the agriculture sector employees were affected heavily. The biggest benefactors were digital wallets and the netbanking sector, Paytm-a digital wallet application reported a 300% increase in downloads. It is assumed that undeclared income of rupees four lakh crores from various sources all over the country will be recovered or become redundant. Economists predict that over the long term, demonetization will lead to reduced interest rates and also cause an increase in investment in the real estate sector. The smallest action is better than the greatest intention-even though demonetization was announced with good intentions-it affected the lower and middle class heavily as compared to the affluent class.

There is no doubt that e-transaction will strengthen the people of India. It will brings the transparency in the economy. We can sure hope a good future with this decision. The black money must be arrested at any cost. We should learn quickly the e-transaction process to make paperless economy.

The facts and figures are completely a personal assessment and tried best to present in correct form, however you need to match the data from other resources also.

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