17 thoughts on “Demonitisation–Pros and Cons

  1. Last year PM Narendra Modi took a historic decision to ban 1000rs and 500rs note in India. He clamed that this decision was taken to fight corruption and bring out all the black money in the nation. All the 1000rs and 500rs notes were said to be deposited to the bank to prevent monetary loss to any person. Many people praised this decision but many were criticizing it too saying it is not the right decision and there were many alternatives to it that will have less harmful affects on our growing economy. One year has passed since demonetization happened and now we have seen all the good and the worst that it had brought to the nation. Some of the benefits of demonetization were:-

    1.Black money in the economy decreased: After the demonetization all the money which was kept hidden for preventing taxation become obsolete and can no longer be used for any purpose what so ever, resulting in people throwing away or burning the money that they can no longer risk to deposit into the bank and get caught.
    2.Increase in Cashless transaction: Demonetization led to less money in the circulation because of which People started to use net banking and mobile payment methods more for any purchase and sale.
    3.Promoting banking: Number of bank accounts increased after demonetization. People started keeping money into the bank rather then keeping it at home. Money in the banking sector increased resulting in low rate home loans.

    Even though the benefits brought by demonetization cannot be unseen, there is no denying that it did harm our economy in many ways.
    1. Fall in GDP: The biggest impact was seen on GDP which had a significant fall. Inflation also increased and people were not able avail many basic needs.
    2.Shutting down of firms: Most of the Small and Medium size firms run on liquid money. Demonetization caused lack on liquid money with these firms resulting them not able to function and hence left with no choice then shutting down.
    3.Harmful to Agriculture industry: Just like MSME our agriculture sector is highly dependent on liquid money. Demonetization let the agriculture industry to suffer huge losses and farmers and people connected to the sector fighting to survive.
    And the biggest drawback to the demonetization will be that government is still not able provide any data on how much black money was brought back to the economy which keeps the us in a doubtful position.

    1. You should start with the definition of demonitisation. Your first para is very lengthy. You should just write the meaning of demonitisation and main motive why gov has implemented it.

      In 2nd para, try to write the negative points first and then positive ones(So the evaluator will read the positive points later-psychological effect/ recency effect). Just write imp points as words are limited. Also, don’t try to explain everything as words are limited.

      You did not write any conclusion. You can write like that Government should have printed the new currency in large quantity and supplied it to the banks so economy would have not suffered a lot. Or in future if gov plans to do this again, they should have prepared better.

      Also, there are some grammatical mistakes. It will be resolved if you keep practicing.
      Overall, great attempt. Keep practicing.

    2. Demonetisation happened before 2 years ie in nov 2016 not last year… fight against corruption…Avoid grammar mistake dude.

  2. Demonitisation Pros & Cons

    Demonitisation refers to the process in which large valued currency are withdrawn from the country , hence terming it has illegal & that which cant be used as legal tender notes .It was introduced first in 1938 .Recently ,on november 8th we have witnessed the same .The main aim of the demonetisation is to control the flow of money thus ensuiring a stable economy for the nation as well as for their citizens .Money although it is used as a legal tender in market and for transactions, it is also misused by the unwanted social elements so as to curb the development of the nation and also to enact terrosim in dffernt parts of the country.Although the government safeguards the national finance it can be done only to some extent only.Mostly the terrosim are funded by fake currencies especially large denomination which they print themselves and use it to buy weaponary from black markets.Some of these currencies are also even dissolved in the public thereby leading to a near impossible to trace the source.These can only be stopped if the people are having enough machines to verify the same which is not possible.Hence withdrawal of these large denomination is one of the ways which can reduce these atrocities.Other objective for the demonetisation was to curb black money which was illegally kept by the few .These black money are actually the wealth of the nation which can fund many positive changes to the societies.
    The deomentisaton which we have seen now although helped curb black money to some extend but was not that efficent as they estimated .The recent RBI survey has showed that around 99% of the notes have reached there that means that mostof the blaks were also converted to whites hence ,it termed the process a big failure.thus induced the declining of the GDP to some extent.The public faced many difficulties as the illegal tenders had to be converted and has to be stashed on banks so has to avoid any loss of their finances.The banking sector had to extend their working hours so as to speed up this process.This created a havoc for many ,but it also laid the foundation for the base of Digital banking .This created a pavement for immediate relief for large transaction and also these technnical knowhow had reached even to the rural areas there by helpng all become aware of Digital Transactions.
    The digital transaction helped flow of money much more controlled and helped reducing stashing of black money there by helping the nation to revive its revenue much faster .The introduction of paytm and QR codes also enhanced the merchants to collect the payments much more secured manner thus reducing liquid cash flow.Although the Demonitisation couldnt achieve its objective in the desired manner but it helped our Nation transform Digitally.

    1. In 1st para- write the specific date. Recently on Nov 8th is not appropriate as it has been more than 2 years. You’d 1st para is too large, try to reduce it. You do not have to explain like to buy weapons etc. These types of sentences are not required and shows that you are just writing them to extend the word limits. You said about the large denomination currency but the gov introduced even larger 2000 rs note. So don’t write it like it. It will create a negative impact.
      The digital payments were going up during Demonitization but they have slowed again. Also, there is digital as well as financial illiteracy in rural areas, if you are mentioning that digital payment helped rural India, then you should mention the source or report.

      Also, you end your essay with digital payments. You lost the track and jumped to a different topic. You can write one line on digital payments but not the whole paragraph. Write about Demonitization only – writing something like it could have been better if it was planned carefully so that people could have avoided the hardships.

      Overall, a good attempt. But still lot of practice required . Keep practicing.

  3. Demonetization refers to the conversion of ‘specific’ valid legal tenders as invalid, as and when announced by the Government of the country. In India, demonetization took place earlier in 1946, 1978 and now the recent in 2016, on November 8, when the legal tenders of 500 and 1000 banknotes of Mahatma Gandhi series were declared invalid. As per the report of the Central Bank, the RBI, almost 99.6% of the currency notes were returned back to the banks.

    The basic moto of demonetization was to bring out the black money, which refers to the money earned by illegal means or the excess money for which the taxes are not paid. Further it was noticed that these undeclared money were used to fund the terrorist groups, so to combat counter-terrorism it was the need of the hour. And to fight against inflation, the major problem of the Indian economy, demonetization played a vital role. Though it came with the number of other issues that effected the life of common citizens. With less money in hand, demand decreased. Leading to the decrease in the interest of the fixed deposits. So the gradual slowdown of the investment was observed as the foreign investors started pulling the money out of Indian market. As we know informal sector accounts for more than 40% of the India’s GDP and provides employment to almost 80% labor force. With less money in the hands of people, MSME and agricultural sector output declined massively and the growth was reduced from 40% to 20%. As a result of which the GDP growth of the economy decreased as compared to the growth of the previous years.

    Hence we can say, though this move had some short term losses, it has a long-term gain. And again, demonetization is not the panacea alone to fight the issues engulfing Indian economy.

    1. Very good essay. To the point. But you mentioned long term gains – describe them. If all the money is back, then how it helped as it means that all the black money is converted in white. You can mention the income disclosure scheme here.
      In 2nd para, the Points you give are the one given by government but you should also write some actual positive points like increase in digital transactions . You can mention the data.
      The details of informal sector shows that you have knowledge about the issues and you are familiar with the current happenings.

      Your writing skills are good and the content is structured properly. Keep practicing.

  4. “Demonetization” means abolishing the value of the currency notes and coins which is in circulation. This is the third time the government is announcing demonetization in India and this time the ‘500’ and ‘1000’ rupee denomination notes were made invalid and new notes of ‘500’ and ‘2000’ were introduced in the currency system. Even-though many Economists heavily criticized the move but some of them also appreciated all over the world.

    The main advantage of Demonetization is ‘boosting digital economy’. After demonetization other than Uneducated and rural people almost all people started using digital modes of payment like Credit card, Debit card, Mobile Wallets. The usage of mobile wallets has seen a surge of over 300% during Demonetization time. Eradicating black money, counterfeit currency and to stop terrorist financing has also been mentioned as its advantage by the government during demonetization but impact is not major.
    When positives are there some negatives are also will be there,the major impact of demonetization is cash shortage in sectors like Agriculture which is highly dependent on cash, Manufacturing sector, Transportation etc… The GDP growth for the third quarter has dropped less than 7% during 2016-17. Some unnatural deaths are also happened during the exchange of notes in Banks. The main advantage stated by the government is eradicating black money, but as per RBI report over 99% of the demonetized notes came back. Also for printing of new notes RBI has spent a lot.

    I am concluding by saying that though the effects of demonetization is adverse, slowly India came back to normal pace and now ‘Digital Economy’ has been seen as the main advantage of Demonetization.

    1. Good attempt. But you write about digital payments a lot. So it looks like you are just praising for this positive factor. When government announced demonitisation, they were not looking for increase in digital payments, It was one of the outcome but government was not targeting this. You should write about this only in the concluding paragraph as how it helped.
      Also, When you mention some data, try to cite the source to it seems authentic.
      Try to avoid using word “I” until the essay topic is like “Share your views”
      The concluding paragraph could have been better. Overall a great attempt. Keep practicing.

  5. Demonetisation is the act of stripping a currency unit of its status as legal tender. On 8 November 2016, the Government of India announced the demonetisation of all Rs.500 and Rs.1000 banknotes of the Mahatma Gandhi Series. The government claimed that the action would curtail the shadow economy and crack down on the use of illicit and counterfeit cash to fund illegal activity and terrorism.

    Let’s focus on the negative aspects of demonetisation first. According to the Reserve Bank of India’s annual report for 2017-18, 99.3% of the demonetised notes have been returned to the central bank. One of the primary aims of demonetisation is to extinguish hoards of ill-gotten currency notes. By seeing the data we can say that it has failed to do so. Given the sheer logistical difficulty in penalising all those who converted unaccounted money into legal tender, demonetisation worked as an unintended amnesty scheme. Some of the studies suggest that demonetisation policy, which likely wiped at least 1% from the country’s GDP and cost at least 1.5 million jobs, failed to wipe significant hordes of unaccounted wealth from the Indian economy. Transactions with ₹2,000 notes in the absence of ₹1,000 notes are difficult as it is a departure from the currency denomination principle (every note should be twice or two and a half times its preceding denomination)

    True, there have been some benefits. For instance, the number of income tax returns filed has surged a little over the trend growth rate. Cashless modes of payment have become more common. Demonetization has shown state’s resolve to crack down on black money. Since this action has commanded support amongst the population, demonetisation shows that black money will no longer be tolerated by the wider public. Demonetization can have profound impact on real estate prices as black money was used evade taxes on property sale and have resulted into inflated prices.

    Not all policy choices work out and accepting mistakes or planning flaws helps strengthen governance processes. For example, learning from the UPA’s mistakes, a cleaner auction process for natural resources has been worked out. There are some hiccups in the implementation and miscalculations regarding demonetisation can be seen. But if we see the bigger picture, on positive side there are some benefits like Awareness against black money and consciousness about legal and punitive measures is an intangible positive effect of this demonetisation. It will change the mind-set of the people to keep away from black income. This shake-up of Indian society will be a big outcome though it may not be measurable.

    1. Great essay.
      Try to avoid criticising any gov. Your essay is good but you have used complex sentences. Try to use easy one so there will be less chance of grammatical mistake. Your clarity on this topic seems great.
      Practice regularly.

  6. Demonetisation is defined as the withdrawal of coins, currency, precious metals from use as a legal tender. Demonetisation took place three times in the Indian history, in 1946, 1978 and recently on 8th November 2016. Government of India banned use of Rs. 500 and Rs. 1000 notes as a legal tender. Purpose behind the demonetisation was to curb corruption, to prevent counterfeiting of currency, to prevent terrorism and to promote digitization. As a two sides of a coin demonetisation had both good and bad impacts on Indian economy. First let’s talk about its bad impacts.

    1- Agriculture and MSME sector in India weighs significant portion of employment, more than 60% of employment is from these 2 sectors,
    again nearly 80 % of the business in India belongs to informal sector. All these sectors depend up on the cash transaction for day to day business, demonetisation withdrew almost 86% of currency from the market and this currency crunch had very bad impact on the informal sectors which resulted in high unemployment following the demonetisation.
    2 – Demonetisation slowed down export activities and derailed the economic growth of the country, many experts claimed that Indian gdp growth rate slowed down almost by 0.5% because of demonetisation.
    3- Almost 99.3% of the currency returning back to the banking system raised question over government’s claim to curb black money, many experts sited improper implementation of demonetisation as a reason for this.

    Now let’s see advantages of demonetisation.
    1- It has definitely conveyed the massage in the society that government will not tollerate on the ill activities like corruption, terrorism and tax evasion in the future, as a result of this direct tax registration increased almost more than 20% after demonetisation. This increase in tax base will increase revenue of the government which can be used for welfare activities in near future.
    2- It has boosted the degitisation of the economy, e commerce increased significantly following demonetisation which will increase economic growth in the future.
    3- With return of the 99 % of the banned currency unaccounted money came into the accounting of the banking system. With the help of JAM government can put a check on creation of blank money in the future.
    4- Government introduced PMGKY following the demonetisation, money collected from this scheme will definitely help to fund welfare schemes in the economy.

    Concluding the demonetisation, it had some short impacts on the economy, had it been implemented properly it would have negated these short impacts, but has a potential for long term benefits which government can concentrate upon to thrive our economy.

    1. Don’t use the word recently as 2016 is now old.
      Try not to use points within essay.
      Also, mention source for the data to look it seem more authentic.
      Conclusion can be better, which long term benefit potential you are talking about.
      You can skip some positive points in start and can mention it here like digital payments.
      Overall, great attempt. Keep practicing.

  7. Demonetization is the act of removing a currency unit of its status as legal tender. Introduction of new currency, excess currency storage, higher corruption rates, increase in the shadow economy and an increase of fake currency in the economy of a country are the main reason of demonetization. Demonetisation can be direct or indirect. In the Indian context, a gradual withdrawal of specific older series of notes such as ₹1,000, ₹5,000 and ₹10,000 currency notes in 1978 is an example of indirect demonetisation. Whereas, ₹500 and ₹1,000 notes withdrawal in 2016 is an example of direct demonetization.

    Following are some of the positive outcomes of Demonetization. It will boost the digital economy and financial inclusion. It helps in reducing the excess storage of cash and fake currency. It is one of the steps to reduce the shadow economy. Reduction in anti-national activities will be an additional benefit as the people involved in these activities will face a cash deficit. There will be an increase in tax compliance across the country. Due to the increase in currency value, the price of perishable food items will decrease for the short-term. I want to add an analogy. If we consider the economy as a body currency is blood to the economy. Whereas, demonetisation is a blood-purifying activity.

    Demonetisation alone cannot provide the desired results. Proper planning, strict execution and other activities such as well thought policies will help in achieving the results. Without additional actions, demonetisation with poor planning and execution can become a demon to a country’s economy. In the early stages of demonetisation, the currency value will increase resulting in an increase in the price of non – perishable food items. For a short – term, there will be a decline in economic growth since there will be a decrease in purchasing power. Demonetisation will slow down the velocity of money, which will affect the supply-demand equilibrium. In countries where cash-based transactions are high demonitisation will impact economic activity. In rural areas, where the level of the digital economy is low, demonetisation will badly hit the small farmers, daily wage labourers agriculture and related sectors. Physically visiting a bank, waiting in long queues will impact productivity in the early stages. In the absence of proper laws, demonetisation cannot run effectively. An alternative mode of transactions, for example, Gold will increase in the shadow economy. With the loopholes in the system, we cannot achieve the desired goals.

    1. Your content is good.
      But you should write the negative points first and then positive.
      And in the conclusion you can write if the negative points can be taken care of, then it will be good for economy and for common people

Leave a Reply