Question

in A Demonetization has brought many changes the Indian Economy? Comment this statement.​

Answer 1

Demonetisation lowered the growth rate of economic activity by at least 2 percentage points in the quarter of demonetization, said a working paper entitled 'Cash and the Economy: Evidence from India's Demonetisation.

Answer 2

Answer:

Demonetization is the process of removing a currency unit's legal tender status.

Explanation:

Inflation decreases as a result of demonetization because there is less market liquidity and cash flow. The money supply will gradually decrease as illicit funds leave the system. In the absence of any Reserve Bank of India open market interventions, this will lower the inflation rate.

• In an effort to stop counterfeiting of the current bank notes that are allegedly used to fund terrorism, manage black money, and lessen income disparities among the country's citizens, demonetization was implemented.

• Every time the national currency is changed, demonetization is required. A new currency unit must be introduced to replace the previous one. The liquidity side of the economy is impacted by demonetization.
• The impact will be evident because the majority of the nearly $86$percent of currency value that was removed from circulation was not replaced. In $2015$–$16$, the year before demonetization, the amount of currency in circulation accounted for $12.1$% of India's nominal GDP. As the banking system struggled to reintroduce cash into the system after demonetization, it fell to $8.7$ percent in $2016$–$17$. This ratio has increased steadily since then, reaching $12$ percent in $2019$–$20.08$