Side - Effect of Demonetisation in India
Side - Effect of Demonetisation in India :
The entire nation was hit on November 8, 2016
when the India prime Minister Narendra Modi announced
the demonetization of Rs 500 and Rs 1000 currency notes
and the same to be replaced by new notes of Rs 500 and
Rs 2000 from midnight of the same day.
The main reasons cited were to fight against the evils
inflicting the society and to reduce : Black Money,
Corruption, Terrorism, The use of Drugs, and Smuggling.
Reactions :
Finance Minister Arun Jaitley said that demonetisation
would clean the complete economic system, increase the
size of economy and revenue base and demonetisation as
"an attempt to change the spending habit and lifestyle."
The President of India Pranab Mukherjee welcomed the
demonetisation move by calling it bold step.
Chinese state media Global Times praised the move and termed
it as "Fierce Fight Against Black Money and Corruption."
Singapore-based paper The Independent published a laudatory
article on the move titled
"Modi does a Lee Kuan Yew to stamp out corruption in India."
Criticism :
Chief Minister of West Bengal Mamata Banerjee called the
new declaration "DRAMA".
Former World Bank Chief Economist Kaushik Basu said that the
'DAMAGE' is likely to be much greater than any possible benefits.
Opposition :
Mamata Banerjee and arvind kejriwal stongly opposing the
current government on the demonetisation.
A Congress-led opposition, which includes 13 political parties
opposed the current government on the demonetisation issue.
The former prime Minister of India Manmohan Singh questioned to
Prime Minister where people have deposited their money in the
banks and not allowed to withdraw their own money.
Strikes :
As the demonetisation was opposed in both houses of the parliament,
it triggered organised nationwide strikes across India but there is
no such effect in any state.
After Effects :
Cash Rush :
The shortage of cash due to demonetisation and most people holding
old banknotes, faced difficulties to exchange them as endless lines
outside banks and ATMs across India.
Stock Market crash :
The day after the demonetisation announcement, BSE SENSEX crashed
nearly 1,689 points and NIFTY 50 plunged by over 541 points.
Evasion attempts :
Gold purchases :
In Major cities sales of gold suddenly increased in few
hours of declaration from 31,900 (US$470) to
45,000 (US$670) per 10 grams (0.35 oz).
After facing This Situation government are Seized those Jewellers
Who are included With This Type Of corruption and made a rule to
give personnel details (PAN No) when purchasing gold.
Donations :
Authorities of Sri Jalakanteswarar temple at Vellore discovered
cashworth 4.4 million (US$65,000) from the temple Hundi.
Multiple bank transactions :
There have also been reports of people attempting to
convert black money into white by making multiple
transactions at different bank branches.
People were also getting rid of large amounts of banned
currency by sending people in groups to exchange their
money at banks.
In response,the government announced that the exchange
transactions are carried out only once by each person
and reduced the exchange amount to 2,000 (US$30).
All the bank accounts are tied up to one PAN so, it will be
tracked as one account at aggregated level.
Advance payments :
After Announcement of demonitisation it led to people using
the old 500 and 1,000 notes to pay large amounts of
outstanding and advance taxes.
Public opinion :
Inspite of facing problem common people seems to be
happy by this bold decission.
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