Question

write essay demonization and its effect?
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Answer 1

Answer:

Demonetization is the act of removing currency as legal tender. The current form of money is stripped from circulation and dismissed in the case of Demonetization. New forms of notes and coins are replaced by the old ones. Nations often fully introduce a new currency by replacing the old currency. The most crucial thing about Demonetization is that notes and coins of a certain denomination are banned by the central government. There are certain merits and demerits of Demonetization. When a new policy is introduced by the government, it has to face several challenges and obstacles. Demonetization is not an exceptional one. 

Advantages of Demonetization 

Corruption is reduced drastically due to Demonetization. The dealing of black money stops abruptly because of Demonetization. Government pushes the future of the corrupt people in stringent darkness by implementing Demonetization across the nation.

Liability of the government is reduced by the introduction of Demonetization. The risk and liability of liquid currency is reduced too. It is quite convenient to handle soft money in place of hard currency. Demonetization also reduces the liability notes of the government. 

One of the huge impacts of Demonetization is that in certain cases, it leads to tax avoidance. The deposited money will be tracked by the Income Tax authorities. Hence, people who are known for their tax avoidance will become hesitant to do so. This will lead to fulfilling the government exchequer in a proper way. The transaction of loan will also be under review. Flow of taxes will increase. This will lead to the implementation of different welfare measures taken by the government.

Challenges Faced by Demonetization 

One of the major challenges faced by the introduction of Demonetization is the connectivity of the internet. Since digital transactions are promoted everywhere, maximum people will go cashless. But not in every part of the world there is adequate internet connectivity. In developing nations, certain policies should be implemented first with proper infrastructure. 

Another result of Demonetization is cash shortage. Chaos cannot be avoided due to the dearth of cash. This was the exact scenario during the 2016 Indian banknote Demonetization. People faced numerous problems in exchanging and depositing the demonetized banknotes. Few unwanted casualties also occurred because of this ruling.

The major negative impact of Demonetization is felt in the rural areas. The agricultural sector entirely depends upon cash. Moreover, rural people do not possess adequate financial literacy to handle the situation. In India, almost 80% of the rural population is unaware of the term digital transaction. Plus, there is still a lack of knowledge of computers and a cashless economy. During the 2016 Demonetization, this chunk of the population was hit badly.

Answer 2

Demonetisation refers to the process of changing the form of money accepted as legal tender.

Explanation:

1. Demonetisation can be defined as the process of changing the currencies that could be accepted as legal tender money in an economy.
2. Demonetisation is an economic measure to deal with economic issues such as inflation, and black money which fuels corruption and affects the development of any country.
3. The effects of demonetization are not seen immediately.
4. However, everything gets better over time and the objective of demonetization is achieved.