DEMONETIZATI

ON-ISSUES &
CHALLENGES THAMMANAGOWDA
FACULTY & HOD
DEPT OF COMMERCE & MANAGEMENT
RURAL COLLEGE, KANAKAPURA, RAMANAGARAM DIST
BACKGROUND OF DEMONETIZATION
➤ On 8 November 2016, the Government of India announced the
demonetization of all ₹500 and ₹1000 banknotes of the
Mahatma Gandhi Series. The government claimed that the
action would curtail the shadow economy and crack down
on the use of illicit and counterfeit cash to fund illegal
activity and terrorism.
➤ The sudden nature of the announcement and the prolonged
cash shortages in the weeks that followed created significant
disruption throughout the economy, threatening economic
output.

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BACKGROUND OF DEMONETIZATION.
COUNTED.,
➤ The Indian government had demagnetized bank notes on two
prior occasions—once in 1946 and then in 1978—and in
both cases, the goal was to combat tax evasion by "black
money" held outside the formal economic system.
➤ In 1946, the pre-independence government hoped
demonetisation would penalise Indian businesses that were
concealing the fortunes amassed supplying the Allies in World
War II.
➤ In 1978, the Janata Party coalition government demonetised
banknotes of 1000, 5000 and 10,000 rupees, again in the
hopes of curbing counterfeit money and black money.

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DEMONETIZATION - MEANING
➤ Demonetization is the act of removal of a currency unit of its
status as legal tender.
➤ Demonetization is necessary whenever there is a change of
national currency.
➤ The old unit of currency must be retired and replaced with a
new currency unit.

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REASONS FOR DEMONETIZATION 2016
➤ We knew terrorism is a frightening threat, but who funds
these terrorists? Our enemies they use the fake currency
to sponsor terror-this was proven many a times.
➤ Corruption and black money are the major obstacles in our
country. It is weakening the efforts to remove poverty.
➤ Our country is rapidly increasing in terms of growth and we are
in No.1 position in terms of growth but we are ranked 76 in
Global Corruption Perception ranking. It clearly shows how
corruption and black money have spread their movements.

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ISSUES OF DEMONETIZATION
➤ Bring our Black money
➤ Abolition of Fake money
➤ Control the Inflation
➤ Reduce the Rate of Interest
➤ Make it Digital India through E-transactions
➤ Transparent money transaction
➤ Increase the Tax Revenue

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CHALLENGES OF DEMONETIZATION
➤ No clear concept of Indian money from Foreign Bank.
➤ Highly affected by the savings economy.
➤ No clear idea about money withdrawals.
➤ To curb small business sectors.
➤ Low transaction by poor, middle class people.
➤ There is no daily wages work in all sectors of Indian economy.
➤ No permanent and alternative solution of demonetization.
➤ More roles for commission agents to exchange old and new currencies.
➤ Lack of New Five hundred rupees currencies.
➤ Tribal and hill area people were highly affected for transaction.
➤ No clear idea about Participatory Notes.

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CONCLUSION
➤ It is no secret that the evil of corruption and black money too
have grown-up beyond the control of the system. In fact, they
are manipulating the system and weakening the efforts in
financial inclusion. Similarly, existence of huge number of high
value currency notes has created conducive environment for
noticing black money, corruption in business and politics and
funding of terrorism by hostile nations. Hence, demonetization
was one of the major steps to make economy free of these
evils.

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