DEMONETISATI ON BY: PRIYANKA PAYAL PAREEK
DEMONETISATION
BY: PRIYANKA PAYALPAREEK
MEANING OF DEMONETISATIONDemonetisation is the act of stripping a currency unit of its status as legal tender. The old unit of currency must be retired and replaced with a new currency unit.
INTRODUCTION
On 8 november 2016 PM Narendra Modi announced the demonetisation in an unscheduled live televised address at 20:00 Modi declared that use of all ₹500 and ₹1000 banknotes would be invalid past midnight, and announced the issuance of new ₹500 and ₹2000 banknotes in exchange for the old banknotes.
PROCESS TO EXCHANGE DEMONETISED CURRENCY NOTES
CONTINUEDCash withdrawals from bank accounts were restricted to ₹10,000 per day and ₹20,000 per week per account from 10 to 13 November.[ This limit was increased to ₹24,000 per week from 14 November 2016.A daily limit on withdrawals from ATMs was also imposed varying from ₹2,000 per day till 14 November, and ₹2,500 per day till 31 December.This limit was increased to ₹4,500 per day from January 1, and again to ₹10,000 from January 16, 2017.
EXCEPTIONS FOR WITHDRAWALOn 17 November 2016, families were allowed to withdraw ₹250,000 for wedding expenses from one account provided it was KYC norm.The rules were also changed for farmers who are permitted to withdraw ₹25,000 per week from their accounts against crop loans.
REASONS BEHIND DEMONETISATION
To tackle black money in the economy.To lower the cash circulation in the country which "is directly related to corruption in our country.To eliminate fake currency and dodgy funds which have been used by terror groups to fund terrorism in India.To fight Black money, corruption, terrorism and counterfeit currency with one single decision.
WHY DEMONETISATION BECAME MASTERSTROKE BY PM MODI
Boost deposit base and savingsImprove monetary transmission and reduce lending ratesThe demonetization drive of higher denominated notes should give a push to cash deposits in Jan Dhan accountsBenefits from higher income tax collectionsRise in GDP growth potentialSupport government finance
EVASION ATTEMPTS AFTER DEMONETISATION
Converting black money into GoldDonations in temples and otherMultiple bank transactionsBooking large number of tickets in railways and airwaysDepositing money in the accounts of their parents, relatives and friendsEnticing people with some percentage of money for exchangePaying bank loans
CONTINUED…Paying a few months salaries in advanceUsing their links with bank employees to exchange of notes.
POSITIVE IMPACTS
Demonetization impacted 20 Trillion Human Trafficking Industryother sectors like drug trafficking, illegal trade and the money use in it, funding of election and involvement of various terrorist groups effected badly.Steps towards cashless economyReal estate can see significant course of correctionLess chance of avoiding taxesParallel economy
NEGATIVE EFFECTS
Cash shortageStock market crashDumping of agricultural produceDrop in industrial outputQueues outside of bankPeople faced difficulties in marriage occasions and otherMany people don’t have bank accounts in rural areas
RESULTS Income tax raids and money came into systemFighting corruption and counterfeitingExpanding the formal economic grid and building digital economyThe Indian finance minister Arun Jaitley claimed the direct tax collection has increased 14.4%Government reports a combined 268% year on year increase in tax collection for november 2016.
CONTINUED..IT department sent notice to 16 lac people for huge depositsIt brought alertness in people A lot more retail outlets are accepting e-wallets India is moving towards cashless transactionsPublicized survey results claimed that 90% of Indians support the demonetisation initiative.
CONCLUSIONIt can be said this is a historical step and it is supported by 90% of citizens. We cannot conclude the whole demonetisation instantly, have to wait till 1 or 2 quarters of 2017 It made difference in large extent specially against terrorist activities.Some of superficial culprits & bank officers are already terminated or arrestedIndian citizens now moving towards cashless transaction hopefully digitalization may bring success.It’s a future centered decision hope it will fetch results in long term.