Question

Advantages and disadvantages of demonetization in india

Answer 1

hi there,

Advantages of demonetization..

Demonetization was introduced as a policy because it was thought to have numerous advantages. Below are some of the key advantages that are often associated with demonetization.

Getting fake currency out of circulation: Demonetization can also be used to get fake currency out of circulation in a country’s economy since such currencies cannot be deposited in banks and other financial institutions.Controlling inflation: When inflation really gets out of hand, one solution can be to completely change the currency and to start afresh. With increase in cash available for government expenditure and reduced state borrowing, inflation will fall for the short term and thus prices of basic commodities will also fall.Tax Collection: Money deposited in the bank during demonetization can be taxed especially if the affected parties were trying to evade taxation by keeping hard cash...

Disadvantages of demonetization

Demonetization is not all beneficial and even proponents of demonetization acknowledge that it does have its disadvantages. A few of them are outlined below.

Little cash in circulation: Cash crunch is a major disadvantage of demonetization due to the unavailability of small currency denominations, an issue which makes it difficult to make small purchases.Inconvenience and annoyance to the public: Sometimes, demonetization can be very inconvenient. For example, sometimes the government will remove certain denominations of bank notes from circulation but keep others. It can be annoying when smaller coins are removed from circulation and you do not have enough change. Further, queuing up in banks to deposit money or exchange currency can be inconveniencing.Slowdown in Economic Growth: Economic growth will experience a period of lull due to business disruptions, at least in the short term...