Question

What are the diadvantages of demonitizatoin in 10 points

Answer 1

The biggest disadvantage of demonetisation has been the chaos and frenzy it created among common people initially. Everyone was rushing to get rid of demonetised notes while the inadequate supply of new notesaffected the day to day budgets of citizens. Banks and ATMs witnessed long queues while small businesses suffered temporary financial losses. The situation was even worse in rural India where people struggled to exchange and withdraw cash due to lack of enough number of banks and ATMs in their vicinity.

Another disadvantage is that destruction of old currency units and printing of new currency units involve costs which has to be borne by the government and if the costs are higher than benefits then there is no use of demonetisation.

Another problem is that this move targeted the black money, but many people who had not kept cash as their black money and rotated or used that money in other asset classes like real estate, gold and so on were not affected by demonetisation. It turned out that more than 99% of demonetised currency came back to the RBI and was accounted for. Therefore, the government’s claim about black money fell on its face.

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