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Demonetisation in India - A Tale of Merits and Demerits

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Demonetisation has been a topic of hot debate since its implementation in India. On November 8th, 2016, the Indian government announced the demonetisation of higher currency notes (₹500 and ₹1000) to curb black money, counterfeiting, and terrorism. The move affected over 1.3 billion Indians and was hailed as a bold reform by some and heavily criticised by others. In this blog article, we will discuss the merits and demerits of demonetisation in India.

Merits of Demonetisation in India - The merits of demonetisation are numerous and varied. Some of the significant merits of the move are:

1. Curbing Black Money: One of the primary aims of demonetisation was to curb black money, which was rampant in India. The move forced people to disclose their hidden wealth, leading to increased transparency in financial transactions.

2. Boosting Cashless Transactions: Demonetisation led to a significant increase in digital payments, which is a positive change for the Indian economy. The move encouraged people to move towards cashless transactions that are more transparent and less prone to corruption.

3. Curbing Terrorism and Counterfeiting: Demonetisation aimed to curb the funding of terrorism and counterfeiting, which is done through high-value currency notes. By withdrawing the higher currency notes from circulation, the government aimed to make it difficult for these activities to take place.

Demerits of Demonetisation in India - While there are several merits to demonetisation, there are also certain demerits associated with it. Some of the significant demerits of demonetisation are:

1. Economic Slowdown: Demonetisation led to a severe economic slowdown in the short term. Small businesses were hit hard, and there was a significant loss of jobs.

2. Logistical Issues: The sudden withdrawal of high-value currency notes caused massive logistical issues for banks and individuals. There were long queues outside banks and ATM's, and it took a long time for the situation to normalise.

3. Ineffective in Curbing Black Money: There is a widespread consensus that demonetisation was not very effective in curbing black money. Most of the black money is stored in assets like real estate and gold, and demonetisation did not address these issues.

In conclusion, it must be noted that the subject of Demonetisation is a complex issue, with both merits and demerits to it. While it did achieve some of its aims, it also caused considerable hardship to millions of people. The long-term impact of demonetisation on the Indian economy is still uncertain, but the debate around this issue is likely to continue for years to come.

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