The move to demonetize Rs 500 and Rs 1,000 currency tenders by the union government of India on 8th Nov, was a laudable and historic effort to clean up the decades long corruption and black money. This scheme has received mixed reaction till now as some of the sections are telling that it can cause hardship for common people while some sections reacted to this decision with overwhelming support. This scheme is going to impact the businesses, common people, and financial institutions along with multi-diverse industrial background of India.
From my point of view, we all should be proud of the fact that we elected a government, which can take such brave decision for the long-term betterment of the country’s economy. If unaccounted or black money isn’t obliterated, it would make the rich richer and the poor poorer.
Government will possess an adequate amount of money to invest in infrastructure, education, agriculture, and all other sectors to build India economically stronger. According to SBI, “Banks received deposits worth Rs 53,000 crore since the government put out of circulation, high-value banknotes in a bid to drain illegal wealth. Nearly 14 lakh crores are held in Rs 500 and Rs 1000 notes now – nearly 86% of the total value of currencies of all denominations in circulation.
This demonetization will be Having Adverse Impact on Following Sectors:
•Black Money Hoarders
Demonetization is to eradicate/ curb black money, with this move black money holders either must show their income source from which they earned their black money to the department or to burn the stashed income.
•Fake Note Circuits
Terrorism is running their operations using fake currency notes. Hence withdrawing the entire series of these high-value currency notes and introducing new currency tantamount to a surgical strike on these groups.
People in rural India has no official form of identification and those who have a significant amount of Rs.1000 and Rs.500 notes will have a tough time in exchanging their notes.
It would become difficult for the common people to do their business/ household works easily.
Favorable Impacts on Following Sectors
Demonetization will lead to payment mechanism through online/card payment, in simple words card transactions will slowly replace the cash transaction in daily activities. As we know cash withdrawals limit from ATM and Banks is being restricted.
•Impact on Jewelry and Real Estate Business
Due to demonization, the demand for gold will rise and people will invest more in gold than the currency note.
•Spike in Bank Deposits
Demonetization will increase bank’s deposits by a huge margin and this will increase their lending activities.
Why there is “hue and cry” in the society over demonetization?
As the saying, “No Pain no gain”. Long term benefits will be associated with short term constraints. Such as endeavour to convert currency, limitation of new tenders throughout the network for a certain period. Addressing the nation, Prime Minister of India provided assurance to the citizens, he quoted, “I want to tell the people again and again that the government will do everything to protect the honest”
What the government still needs to work on?
The introduction of Rs 2000 has been controversial in consideration of government’s efforts to suppress black money by eliminating bigger denomination currency. The strategy seems to be missing in a puzzle.
Demonetization has a potential to break all illegal transactions in real estate, gold, and a few other sectors where circulation of unaccounted money has reached saturation point. However, the bigger players are safeguarding their money overseas and how to recover that money should be the prime focus of the Indian government.
Conclusion: As Indians start getting used to handling digital money, their trust in anything online and mobile will get a big boost. If you can trust mobile and Internet with your money, everything else on mobile and Internet will begin to get trusted as well. More Bank accounts will be opened by citizens as they’ll start keeping their money in a Bank. More and more online transactions will take place not only in urban areas but also in tier 3,4,5 geographies and rural areas.