DEMONETIZATION – A BOOST OR JERK TO THE ECONOMY
Demonetization of 500 and 1000 rupees notes has been a very bold move
by the government and by this they are looking to fight ills of the
society like black money , fake currency notes and ever corruption.
When PM Modi announced that Rs with the denominations of 500/- and
1000/- would cease to be the legal tender from 8th of Nov, the whole
country was stunned. Rumours became rife and some tried to invest
their dying currency in gold. Big queues before the banks and ATMs
became the order of the day.
Instead of getting shorter, these queues were getting longer with
every passing day. The last date for the whole processwas 30th of
December. The person could deposit the old cash worth Rs 2.5 lac till
the said date.
The main objective of this move was to curb the black money
,corruption and fake money menace. Though the people faced a lot of
inconvenience owing to shortage of funds. It caused a sudden breakdown
in India’s commerce and the unbanked economy is hard hit. Trade across
all aspects of the economy has interupted, and sectors like
agriculture , fishing, and the huge informal market were almost shut
down during the initial days of the anouncement. Nevertheless,
although India’s demonetization move was apparently mismanaged in the
beginning, the effect at micro level look advantegeous. For instance,
all sorts of illegal activities, like terrorist funding, etc have been
completely hit after the announcement.
Demonetization effect and the resultant slowdown in the household
spending and corporate investment were evident in yhe fall in GDP
growth estimates released by the government today. The GDP growth for
the Financial Year 2017 was reported at 7.1% while for the fourth
quarter of the Financial Year 2017, the GDP growth stood at 6.1%. The
growth of the farming sector stood at 5.2% for the fourth quarter
while for manufacturing sector it was 5.3%.
Lastly I want to coclude that Demonetization of the 500 and 1000
rupees notes has been a massive exercise by the RBI and Modi
government . This was truly an attempt to fight fake currency, black
money and also the first step to fight corruption. The banks did the
job well by working overtime to ensure old notes are replaced by new
2000 rupee notes and the other denominations. Hoewever, poor people,
villagers who had limites acess to banks, ATMs etc had to struggle
and are still facing the issue. In the short run this is a problematic
issue, but it can be extremely beneficial in the long run.