Demonetization is the combination of De and monetization, monetization means to increase the flow of cash in the economy but demonetization means calling of the currency from the economy or we can say ban of currency in the economy in this session we will discuss the impact of demonetization on different sector let’s start to discover history of demonetization so friends in 1946 demonetization of 1000 and 10,000 rupees took place in India again in 1954 1005(demonetisation essay)
thousand rupee and 10 thousand rupee notes were introduced again in 1978 D monetized the 1000 rupee note five thousand rupee note and ten thousand rupee note from economy so let’s see the impact of demonetization on various sector and first point is GDP we all know that GDP stands for gross domestic product is the final value of goods and services in a particular period of time and a particular reason we can say
GDP is directly proportional to the government expenditures government expending x’ consumer spending investment and net export that is export
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minus import after demonetization the circulation of currency becomes less so GDP will automatically become less because sped links will be less consumption will be less investment will be less and net export will become down that is why GDP will become down in case of demonetization so let us see the short-term effect of B monetization on agriculture sector you do cash crisis farm input is not available in agriculture sector so daily wages Labor’s or daily wages farmers will become jobless if we talk about the long-term effect of demonetization then interest rate will become down because
people are going to deposit their cash in banking sectors so the basis that is lending rate the basin is the rate below which banks are not allowed to land their customer so these types of rate will become down after demonetization because banking sector is getting money at the ad rep or it and banking sector banks are blending to their customer at baseless so rapid will become this and after base rate will automatically come down because base rate is the rate below which banks are not allowed to land their customer and in case of Demonetization bank will have sufficient amount or sufficient
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money to lend their customer so lending rates will come down in case of demonetization so let us talk about inflation what is inflation arises due to higher liquidity presence in the market to do presence of higher liquidity in the market so in case of demonetization less liquidity or less cash flow is available in the market that is why inflation will come down in case of demonetization there are four types of inflation you can say first is creeping inflation second one is trotting inflation or you can say walking or you can say running inflation third type of
inflation is galloping inflation and the fourth type of inflation is hyperinflation if we talk about creeping inflation then you will find annual rate of inflation between two to four if we talk about running inflation or trotting inflation then you will find five to ten per cent the inflation rate if we talk about galloping inflation then inflation rate is ten to twenty % annually we talk about hyperinflation that rate of inflation is more than twenty % the example of hyperinflation where hyperinflation took place in the world the example is Zimbabwe where Zimbabwe government Demonetize its
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currency and adopted another currency to control the situation of hyperinflation so it is a very important objective behind demonetization in an economic so let’s see the effect of demonetization on gold prices after announcement on 9th of November 2016 the gold prices reached up to 40,000 from 32,000 to 20% to 30% hike was observed in gold prices after demonetization let’s see the effect of demonetization on transport sector as toll operators were not accepting the 500 rupee note and 1000 rupee note that is why long queues of vehicles were observed on national highways like Delhi
Mumbai highways and Gujarat iris that is why or 11th of October 2016 our Transport Minister Mr. Gettinger curry announced the suspension of toll on major highways in-country so let us see the impact of demonetization on banking transaction so after announcement within 4 days 18 korona transactions were handled by banking system and there is a huge spike in the use of debit card and credit cards so let’s see the impact of demonetization on income tax rates and cash
Caesars so after announcement income tax department raided in various cities like Delhi Mumbai Chennai Ludhiana and other cities across India and large sums of cash were seized by income tax department so let’s see the impact of demonetization on illegal activity so activities carried out by next slides and terrorists hamper by demonetization of currency.
Advantages of demonetization and see if these two central topics were tackled or not first advantage is that the government will be able to track any amount of unaccounted cash that is with the tax evaders it will stop illegal activities like error funding fake node currency circulation all at once it will increase tax revenue to the government as tax evaders will get caught this extra revenue can be used by the government for schemes and other projects like building roads hospitals etc this will benefit the poor.
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disadvantages the monetization will naturally create chaos this is for multiple reasons tax evaders get panicked market investors middle class everyone gets panic as all cash must pass through bank and there must be enough new cash with the banks to give the public next is middle-class and poor will get affected very badly how is this so most of middle-class and poor make cash transactions when there is not enough cash in the system they are the ones who get affected first now Third Point is a controversial 1d monetization mode stock black money let us take the example of a business the business
is making hundred rupees profit every year but the owner does under-invoicing and shows 50 rupees as profit so he is now having 50 rupees in black as of Noda monetization cannot curb black money fourth point is about the real estate fall tailor state contributes 11 percent of the Indian GDP so what will happen to this Lemon percent and also lakhs of poor construction workers working in the real estate sector fifth point is about rural population in rural places most transactions are in cash most of the population is illiterate and do not know anything about banking also markets like
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Mondays, where eligible goods are sold, get affected very badly the sixth point is recession how will be monetization cause recession recession is nothing but a period of temporary economic decline during which trade and industry activities are reduced so when major sectors of the economy crash there is bound to be recession hitting our economy most economists think demonetization is a bad idea their argument is that if the government wants to come black money with deep monetization then only a fraction of their objective will be achieved this is so because most of the black money is either sent abroad in the form of hawala what is invested in the form of assets like gold.
Conclusion The government had been counting notes for several months post demonetization Now finally they have revealed data which says that 99% of the demonetized currency is back in the banks What does this mean with regard to the viewpoint of black money, I would like to tell you all And finally, in this video I would like to do a final analysis of all the benefits and losses of demonetization I would also like to tell you all about the propaganda being spread by the government. In the beginning, the government said that it expected at least 30% of the demonetized cash to not return to the banks
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because according to them, 30% of all cash in India was black money so the people who had black money wouldn’t come to the banks to deposit their money as if they came, the bank management would match their salary records and see that tax hadn’t been paid on that income and they would get caught that’s why they would either burn their black money or dump it in the river, according to our Prime Minister But no such thing happened 99% of the money has come back There may be two possibilities for this- Either, there wasn’t enough black money which was expected by the government or
people had found new ways of turning their black money into white and subsequently deposit it into the banks I think the second possibility is more probable because as I had mentioned earlier in my previous video, demonetization had various loopholes which were exploited by people to turn their black money into white There was Rs.15.44 lakh crore worth value of demonetized currency Rs.15.28 lakh crore worth of currency returned to the banks So, it is presumed by the public that
the remaining Rs.16,000 crore rupees is in the form of black money But the truth is that a lot of this isn’t black money It is believed that Rs.3300 crore is kept in Nepal and Bhutan, which the government has been unable to bring back A lot of this money includes the cash held by NRIs, which they couldn’t return back A lot of this money also includes the cash held by poor people, which they couldn’t return back And a lot of this money also includes the cash kept in the donation boxes of temples, which they have been requesting the government to take back.