essay on demonitaisation
Answers
Answer:
Demonetization refers to the act of stripping a currency as legal tender. In demonetization, the current form of money is removed from circulation and retired. ... Most noteworthy, demonetization is a move in which a government bans the notes or coins of a certain denomination.
Explanation:
Demonetization refers to the act of stripping a currency as legal tender. In demonetization, the current form of money is removed from circulation and retired. Furthermore, the replacement of this form of money occurs with new notes or coins. Sometimes, a nation completely introduces a new currency in place of old currency. Most noteworthy, demonetization is a move in which a government bans the notes or coins of a certain denomination
Advantages of Demonetization
First of all, demonetization significantly reduces corruption from taking place. It certainly puts a full stop to corrupt practices. Demonetization significantly hampers individuals dealing in black money from carrying out their evil ideas. Most noteworthy, corrupt people in the future will feel scared of hoarding cash.
Demonetization improves the banking system significantly. Demonetization would certainly infuse more sophistication in the banking system. The economy of a nation will move into a cashless direction due to demonetization. Moving in the cashless direction would mean better access to credit and revamping of financial operations.
Another notable advantage of demonetization is reduced liability for the government. This is because demonetization reduces the risk and liability of liquid currency. Furthermore, handling soft money is far easier than handling hard money. Also, every note is a liability for the government. Hence, demonetization reduces this liability by removing certain notes from circulation. Therefore, the old currency becomes useless for those who don’t disclose their income.
Demonetization will lead to fewer instances of tax avoidance. This certainly is a massive advantage of demonetization. Money that is deposited will be taken track of by income tax authorities. Therefore, people will hesitate to use tax avoidance tactics. Furthermore, the loan transaction will also be under scrutiny. Consequently, there would be an increase in the flow of taxes. This would certainly result in government undertaking more public welfare measures.
Challenges in Demonetization
The first challenge is the internet connection and availability. Due to demonetization, many people would go cashless. Therefore, they would resort to E-cash and E-payment. However, in many developing nations, internet connectivity is quite poor. Hence, this forms a major challenge for any government which intends to implement demonetization.
Cash shortage is a natural consequence of demonetization. The scarcity of cash can certainly lead to chaos. This is exactly what took place during the 2016 Indian banknote demonetization. Furthermore, people face various difficulties in depositing or exchanging the demonetized banknotes. Also, the ATM’s can run short of cash for many weeks or months.
Rural areas face huge trouble due to demonetization. This is because rural areas and the agricultural sector highly depend upon cash. Furthermore, these people lack the financial literacy to handle the situation. Moreover, most people in such areas are ignorant of computing technology and the cashless economy.
To sum it up, demonetization is certainly a revolutionary step in a country’s economic system. It is something that has been practiced by countries from time to time. Furthermore, the objectives for demonetization remain more or less the same the world over. Most noteworthy, the decision to demonetize should come by keeping the national interests at the forefront.
600 Words Essay on Demonetization
Demonetization happens when a government legally bans the coins and notes of a certain denomination. The currency which is banned may or may not be replaced by the new currency. The aim of Demonetization is to target multiple problems like illegal activities and their funding source, terrorism, tax evasion, and counterfeit currency.
Effects of Demonetization
Demonetization has long term effects on a nation’s economy. The people in the rural areas who did not have access to internet and plastic money were majorly affected. Since centuries, governments have been using it as a tool to reduce corruption and other illegal activities. Thus, Demonetization boosts a nation’s economy by removing fake currencies and bringing black money into the mainstream.