Prime Minister Narendra Modi on November 8, 2016 announced a ban on old Rs 500 and Rs 1,000 notes. But how was this to affect the economy in the short run as well as the long run? Here are the good and bad points after a year of demonetization.
The Good Factors of demonetization
1. Abolish black money
People having black money usually keep their black profit maximum denomination forex notices. This step would remove black money from the economic system as the owners will not be in a position to deposit the same in the banks.
2. Higher Tax Collection
This led to higher tax Collection as businessmen are depositing cash lying with them currently as current year income with advance tax. Defaulters of the bank, property tax, electricity bills and telecom bills are clearing their long pending and thus utilizing their old currency notices.
3. Demonetisation Leads To Largest Naxal Surrenders
This step would make black money kept in money which usually used to create disorder and fear or is relaxing with terrorists, Maoists, Naxalites, discarded.
4. Price cut in Real estate
This stage almost all that black money would get out of circulation from the real estate. Gradually the sky touching prices of properties will come down to the reach of a common man.
Small vendors who usually deals with cash would now start using cashless modes for dealings or digital methods.
The Bad things of demonetization
1. Violation of concept by public
Many people are coming into ATMs and using 3-4 different ATM cards and receiving money than the recommended restrict for one person, thus violating the limit prescribed by the government
2. Decrease in demand
This is a truth that black economic do support the real economic system from requirement part, that is to say, black money used by the consumers to buy goods or services increases need for those. Although you may say this is wrong but it is beneficial from economy’s perspective.
3. Plight of Main Producers
Lack of property would result in pain to primary manufacturers who don’t have much money so that they could hold their produce for long and on the other side due to lack of currency in flow on the market very less by the buyers in the market.
4. Negative effect of normal sector
Players of a normal sector as they mainly offer with money only are experiencing difficult time due to this Demonetization plan already. Unexpected removal of money from market put their company on an inactive phase.
5. Extreme burden on bank employees
This is a clear reality that there is an extreme pressure on bank workers to deal up with the situation and even after working they are not able to fulfil the need for people.