Demonetization
Demonetization refers to the act of withdrawal a currency from being used as legal tender. Demonetization happens when the current form of money is removed from circulation and retired. In demonetization, a government legally bans the coins and notes of a certain denomination.
The monetized currency loses its worth or value in the market. The currency which is banned may or may not be replaced by the new currency. Sometimes, a nation completely introduces a new currency in place of the old ones. The replacement of the old form of money occurs with new notes or coins.
The aim of demonetization is to target multiple problems such as illegal activities and their funding source, terrorism, tax evasion, counterfeit currency, etc. Demonetization significantly hampers individuals dealing in black money from carrying out their evil ideas. Demonetization improves the banking system. By demonetization, the economy of a nation will move in a cashless direction.
The demonetization of currency will force people to pay income tax. This certainly is a massive advantage of demonetization. Money that is deposited will be taken track of by income tax authorities. Most of the people who have been hiding their income to save tax will be forced to come forward to declare their income and pay tax.
All the monetary transaction has to be through banking methods and individuals have to be accountable for each penny they possess. There would be an increase in the flow of taxes. This would certainly result in the government undertaking more public welfare measures.
Though there are so many positive effects of demonetization the negative impact of demonetization has been tremendous. The first challenge is the internet connection and availability. The people in the rural areas who did not have access to the internet and plastic money were majorly affected.
There is a shortage of cash as old money is exchanged with the banks. Many cash-driven small industries, factories, and shops had to be shut down. This did not only impact the businesses but also their workers and as a consequence, they lost their jobs.
Since the past century governments across the world were taking the decisions of demonetization. The currency which was demonetized may differ but the objectives have remained the same means to remove black money, stop illegal activities, bring currency into the mainstream.
The decision of demonetization was taken by keeping the national interests in priority. Even though there are suffering and agony among the masses right at the moment, but its benefits will be seen in the long run.