Theme :-

  • On 8th November 2016, Indian Government demonetized 500 and 1000 rupee notes that were in circulation, and announced the issuance of new 500 and 2000 rupee notes.
  • Time limit was set to exchange old notes with new ones. Using Aadhaar card no. as proof, govt can know how much currency was deposited or exchanged by individuals.

Why Indian government implemented demonetization move :-

  • To counter black money. People who have black money cannot be able to deposit the old currency easily. So black money can be taken out of circulation. So, A good chunk of black money will be taken out of circulation strengthening India’s economy.
  • To instill fear among the tax evaders that they are not inescapable if they follow illegal practices.
  • This move is intended to be a big blow to the corruption, drug trafficking and smuggling, because all these activities are carried out with black money.
  • Most of the fake currency will be out of the system.
  • Old notes are allowed to be paid for utility bills. This will clear lots of outstanding bills, which will have positive impact on economy.
  • With this move, owners of informal organisations are more likely to register their organisations to transform them into formal organisations. Because only formal organizations can deposit huge amounts of money showing legitimate proofs of their taxes and transactions. More formal organizations means more tax revenue for governments.

Initial support for the demonetization step :-

  • When the move was implemented, it garnered a lot of support. This step was termed as innovative and people thought that this will pave the way towards corruption-less India.
  • Supreme Court responded negatively to the petition asking for withdrawal of the demonetization move and said that the move is laudable.
  • ‘Chattisgarh’ is the first state to pass notion supporting the demonetization move.
  • International response to this move was positive.
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Actual positive outcomes :-

  • No. of digital transactions is increased to a great extent. cashless economy
  • Though most of the demonetized notes returned to the system, government has the details of all transactions and hence can crackdown black money and tax evasioners. Hence demonetization is not a failure.
  • It promoted tax culture.
  • Due to demonetization move, many people declared their black money under ‘Voluntary Disclosure of Income Scheme’, and paid taxes for the same.
  • At least 1% of the demonetized currency didn’t return to system, which means a small part of the black money is eliminated from the economy.
  • Digitization of financial systems including banking has fastened due to demonetization move.

Why demonetization is a failure :-

  • 99% of the demonetized currency notes returned to the government, as per RBI annual report 2017. With this report, it was revealed that the black money holders are not at much loss.
  • The decision was one-sided. India is a democratic country. And every step should be implemented after considering public opinion. Democratic government shouldn’t take one-sided decisions like Monarchial governments.
  • It caused a lot of inconvenience to common people. People were forced to stand in long queues at ATMs and banks as there was very low limit of withdrawal each time.
  • Still there are many Indians, especially in the below poverty line section that have no bank accounts. They will have no other option, because one person could exchange old notes worth Rs.2000/- only. Remaining amount had to be deposited in the bank accounts.
  • People who are in emergency situations such as medical emergencies and marriage ceremonies suffered a lot during the move.
  • Cost of demonetization is more than its benefits. The expenditure for printing new notes and the costs to carry out denomination move were a burden on Indian economy.
  • Most of the black money may not be in terms of physical cash.
  • 85% of transactions in India are cash transactions. So It may not be the right move to force everyone towards cashless transactions all of a sudden.
  • This move caused temporary loss to workers in informal sectors. Because most of them get wages per day in cash. Due to lack of physical cash, employers had to stop work for few days.
  • World Bank estimated that demonetization move will reduce GDP growth from the earlier estimated 7.6% to 7% for the financial year 2016-17.
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Conclusion :-

At first, demonetization move had both supporters and opposers. But when the RBI annual report was made public, a year after the demonetization move, it was clear that demonetization is a failure. It couldn’t stop black money from coming back to the system. Increase in the digital transactions does not mean that demonetization is partly successful. Acceleration of cashless economy can be done in a proper way without causing inconvenience to public.

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Afterwords :- Do you think demonetization of old higher denomination currency notes was a good move? Did we miss any point? Express your opinion in the comment section below.

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  • Rishabh Saxena, Jul 10, 2018 @ 11:28 am Reply

    Demonetisation is a nice move but implemented in the wrong way. It is implemented to counter black money and to give a big blow to corruption and smuggling because they are carried with the help of black money. It has both positive as well as negative impact on the Indian economy. According to the RBI report, 99% of demonetized currency was returned to RBI only 1% of currency didn’t come hence this move was successful to remove at least 1% of the black money from the system. So, something is better than nothing. I know, common people faced lots of problems but with the help of this move no. of the taxpayer also increased.
    it helped to improve the technology of banking sector within very less time of promoted the caseless digital payments.
    So, At last, I want to say only one thing, at least our government is trying to do something for us so we should appreciate it.

  • Jannat Khan, Jun 9, 2018 @ 10:55 am Reply

    In my openion this move had more of a negative impact on indian economy rather then positive it reduces the level of GDP, and badly Impacted rural population and marginal workers . In a country like India where 70% of population depends on agriculture for their livelihood , where majority of population is illiterate, where 85% of transactions are done through cash , where rural banking system is not appropriate , where people like to keep their savings in cash with them rather then in their accounts , where majority of the people find banking processes difficult to understand due to the lack of awareness camps this move was a big failure in term of realising the situations of a country .

    It was a undemocratic , urban centric move having more of a disadvantages and it was implemented without analyzing the future consequences .

  • Gaurav Thakur, May 29, 2018 @ 10:40 am Reply

    According to my knowledge ..demonetization is the best step to reduce the black money and to reduce fake currency ..demonetization is very helpful for stop terrorism because all the terrorist get funded by the help of black money …now they have not enough money to spread violence …and a negative point is that.. At time of demonetization created huge problems for medical emergencies and marriage ceremonies..but my opinion it is good step for our country….

    • Team GD Ideas, May 30, 2018 @ 7:45 am Reply

      True Gaurav! But the black money problem is back to normal after the new notes are released into the market.

  • Ankit Pandey, May 26, 2018 @ 8:49 am Reply

    India is a democratic country and it’s no problem to demonetize the currency. Govt. demonized rs.500 and 1000 rupee note. It was a problem to do many works such as medical emergency and shadi ceremony due to this. we know that Chhattisgarh is the first state where demonitization was supported. So demonitization is good effort to get rid of black money and corruption. There is a good reputation to demotinization move.

  • Shivam tiwari, May 12, 2018 @ 9:22 am Reply

    Demonetization was a good effort by the Indian government .India government stopped rs500&1000notes was not legal tender.and demonetization stopped black money,fake currency ,and curruption in our society.the Indian government was announced 8th November 2016Rs500&1000notes was not legal tender and people started money to recieve our back account on9th November 2016 .so that RBI government said 1%black money saved in our society and 99%cash reached RbI is a long path system in our democratic country….. Atleast demonetization was necessary to stopped black money and fake money.

  • MD ASIF IMAM, May 9, 2018 @ 11:55 am Reply

    Thank you for all your effort, The amount of time I had for GD preparation was so little. But your hard work saved me. Great work. May God bless you.

    • Team GD Ideas, May 14, 2018 @ 7:19 am Reply

      Thank you Asif. :)

  • LOKENDRA SINGH, Apr 9, 2018 @ 10:27 am Reply

    but why 2000 note

  • LOKENDRA SINGH, Apr 9, 2018 @ 9:50 am Reply

    but almost 99% notes are returned so where is black money

  • Diksha, Mar 20, 2018 @ 2:02 am Reply

    The decision taken by the government was all of a sudden because they didn’t want the cash smugglers to have enough time for adjusting their black money.
    Specially the area of J&K got affected by this because the stone pelters were not given new issued notes.

  • sanjay singh, Mar 12, 2018 @ 8:43 pm Reply

    I highly impressed from this article but i would like to say somthing about this. i think the decsion taken by bjp govt is totally in the walfare of india and nobody should have any kind of problem from this decsion .Henceforth, modi’s govt will take this kind decsion in the future.

  • SAMRAT P THAPA, Mar 5, 2018 @ 9:57 pm Reply


    • Team GD Ideas, Apr 11, 2018 @ 10:12 am Reply

      Thank you. :)

  • Prabha, Feb 11, 2018 @ 1:07 am Reply

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    • Team GD Ideas, Feb 12, 2018 @ 10:33 am Reply

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    • Prahlad singh, Jul 15, 2018 @ 12:24 pm Reply

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  • Vijay, Dec 1, 2017 @ 12:23 pm Reply

    But people have to know more about demonetisation

  • Mukul Bhatt, Nov 16, 2017 @ 12:45 am Reply

    The point is.. “A BIG MOVE FOR THE NATION.. Needs, A PROPER EXECUTION”..
    That is what happened, when Modi ji declared the nation about stopping the circulation of ₹500 and ₹1000 notes..and issuing new currency of ₹2000 in exchange of the old currency notes..
    What lacked is just a PROPER EXECUTION..
    But, Talking About the decision..IT IS THE STRONGEST AND BOLDEST DECISION TILL DATE, taken by our Indian Government..
    Also, we can definitely say that the mission behind this big step or initiative has reached its mark or goal as Terrorists, black Money circulators did get a big slap on their face due to this only..
    Thus, thinking about the larger view.. It is indeed the strongest and the most powerful decision ever taken by our Indian government..

  • Rajesh.T.V., Oct 30, 2017 @ 7:29 pm Reply

    According to the experts, there are three types of effects for the demonetization process- they are short term, medium term and long term.

    Unfortunately, we have just short-term information at our disposal. It will be too premature to talk about medium-term and long-term effects.

    We can have information from other countries like Australia which became the first country to release polymer (plastic) notes to stop widespread counterfeiting. There are countries like Ghana, Zimbabwe, Pakistan, Nigeria, etc which have done the demonetization exercise.

    Short-term information will be the old bank notes in the hands of RBI, the difference between the two years(pre-demonetization and post-demonetization) of income tax increase, the increase in banking transactions, the disposable money in the hands of the Indian banks, How much money is given as loans to the public at large, What is the impact in the black money market, What businesses have slumped especially real estate, How much money can be brought from the tax havens abroad and also scrutinizing the double taxation agreement, How much black money could not confiscated because of laxity in rules and regulations, etc.

    The long-term impact will definitely depend on the state-of-the-art technology or sophisticated technology used by the parallel money printing machines. If they can copy the technology within a short period of time, then we will have to go for another round of demonetization in a few years.

    Also the demonetization cannot be considered as an isolated exercise, it will probably become effective only with support from income tax , stringent policies for bringing black money from tax havens, scrutinizing the double taxation agreement routes and creating a sound infrastructure and accessibility for JAM, Making PAN as a compulsory document for minimum transactions and live mechanism for reporting fake notes and swift tracing of its routes and extirpating the source. All these measures in tandem with demonetization will surely pave way for the economic development and prosperity of the country. But now God alone can say the future of demonetization precisely.

    • Team GD Ideas, Oct 30, 2017 @ 8:26 pm Reply

      That’s an excellent analysis!!!

  • Amey, Oct 11, 2017 @ 3:50 pm Reply

    I believe it is a good move but could have been implemented in a better way to avoid the inconvenience factor at least in villages. Each coin has two faces, so does this move. To reach somewhere, its important to start and that’s what was done. During those days, we heard news about people throwing money on terrace or in garbage. Quite of it was even donated in temples. Lot of black money flooded in banks. It shows the impact of the move, though it was not as huge as it was expected. There might not be a right time to do things, right intention is enough to drive a change.

  • Ronik khan, Sep 23, 2017 @ 1:37 pm Reply

    my point of view is its a great step by indian govt bcoz some currpted ministers n politician have a lot black money that’s why by this step all black money came out easily bcoz the can’t deposit their money in the bank and this money is use less for them so now they are in big problem???

  • fakeha kha, Sep 17, 2017 @ 9:19 pm Reply

    but in a democratic country decisions are not taken in such a way, above all to eliminate the problems which were prevailing in the country, the middle class people whose proportion is 85 in india were troubled in such a way that those indians died bcz of suffocation standing in a que for the reason which you term as the best leader and 50% black money is still out and has been changed to white . above alll even RBI didnt had information about this change , maybe in next 30 years the country will change its phase to developed nations but since 50 years the crime rate has just increased and demonetization just gave hike to it.

  • vasanth rajan, Aug 23, 2017 @ 2:18 pm Reply

    Most importantly more than 80% of black moneys are not fluid. , even a child know it has a loop-holes that these black money can made white by diverted it to others account like who don’t know how to access bank account and who don’t have info money to maintain balance, and also in many other ways..
    How you will gate a cash of 2.5lks form bank when bank not have sufficient money to give 4000/- for their customer as a daily limit. Is it possible to complete all formalities within 2.5lks? Each and everyone arrange their child marriage according to their status. It’s possible to arrange a marriage in Mumbai or in Chennai by having 2.5lks. do u know that banks in many villages was not got new 500 & 1000 for public distribution ..
    how many hospital accepted ?

  • viji, Jul 21, 2017 @ 7:14 pm Reply

    yes its good move but government will take good measures for poor people because till now India ,some of the below poverty line people they have only curencies they all are not known about the norms and regulations so that it will affect that persons life but normal man demonetization is welcomed one.. but finally my opinion is no pain no gain this fact also suitable for demonetization .. initially it have trouble for all but finally it will move good

  • Rituraj Tripathi, Jul 12, 2017 @ 7:56 pm Reply

    Yes… definitely it was a historic decision and good move by the Indian government..
    This demonetization happened in a quick approach by the govt following the cloak and dagger secrecy because few days earlier from the demonetization date, it was reported that A big amount of fake currency notes came in Indian currency. Allegedly those have come from China or Pakistan. So I appreciate this decision of govt otherwise it could be the cause of a great damage to India.
    Though this historic decision of the govt faced a huge protest by the opposition but welcomed by the common man for country’s cause despite facing a lot of inconvenience. Some critics will definitely oppose my point that the decision was welcomed. so I want to let them know that if common man and middle class person opposed this decision, BJP could never get such a massive mandate in up election.
    And I’ll firmly say that this historic decision has proved successful….
    One of most clear example is a recent news which reported that due to demonetization the position of India having black money in switz bank has gone below. So now it is clear that this decision has achieved its purpose of fetching out black from switz bank.
    It also created a greater problem to secessionists in funding of terror in kashmir but unfortunately they soon regained their clout.

    These all are the biggest positive effects of demonetization. While there are so many positive effects inside the country amongst the societies.

    This historic decision also indicates the leadership of our Pm… This decision proved him that he never hesitate to take big decisions for the welfare of the country. And in my opinion The person having this attribute is the best leader.

  • Durgesh, Jul 12, 2017 @ 5:24 pm Reply

    Also the many bank managers are help to the corrupted people to exchange the notes so many of the black money remains in same position

  • Bku Naik, Jun 12, 2017 @ 8:10 pm Reply

    I think this big note of 2000 to get more black money in our society. My opinion is again to do demonitization and introduce new note of 1000

  • Aumkar, Apr 25, 2017 @ 4:27 pm Reply

    Whatever which is done to ‘re monetize’ India is a very strategic move by the government. First of all, under ‘Jana Dhana Yojana’ a provision was made such that even the poorest of the poor can open his own account even with nil balance. The people who heeded the government’s warning had to face only a little impact of demonetization. Moreover, this surgical strike on black money was planed only after Diwali. So that the common people did not have to face problems with the money that they need for Diwali to buy things.

  • kunal, Mar 31, 2017 @ 6:24 pm Reply

    The truth and the non denying fact is that corruption will begin to spread again because all the rich people obviously have links with the banks and they changed their currency quite easily …. Corruption is in our minds …. Demonetization will only help little

  • Gopal agarwal, Mar 29, 2017 @ 7:46 am Reply

    It’s really a historic decision taken by our government against corrupt peoples.
    And it requires a lot of bravery to implement it in such a highly populated country.
    That’s why I sault all the people who has been a part of this incredible moment.

  • ASWIN, Mar 11, 2017 @ 10:21 am Reply

    intension was good but not the execution, and no solid statistics are available to prove its worthiness, let the CAG come with a proper analysis as promised recently

  • sohit siwal, Jan 26, 2017 @ 8:17 am Reply

    friends by this move 4000 crore black money caught by government.this move is changing into a cashless economy like narway is a 96% cashless economy and there is no corruption.if india will become a cashless economy then there will not be corruption.
    there were some problems with common people but government gave facility to them like in a marriage a man can withdraw 2.5 lack rupees and in hospitals old notes were accepted.
    thank you friends

  • Sachidananda Patra, Jan 22, 2017 @ 1:47 pm Reply

    in diwali every household to be renewed in each house including the treasury and currency. So Demonitisation is a simillar move rather it is a Swachh Bharat Abhiyan Part-II. In future Part-III will come. This move will not able to stop black money but it will clean the garbage / antisocial elements from India. It is a wonderful move and brave dicisson by all time great Narendra Modi (PM of India). Jai Bharat.

  • Ankur, Jan 20, 2017 @ 12:27 pm Reply

    Corrupt peoples now come in danger as we all kniw that many corrupt peoples are arrested by police in few days after demonatization so i thaink it was a good step taken by government aganist corruption.

    • Alok Gupta, Feb 27, 2017 @ 1:19 pm Reply

      Nice i agree with you

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