Demonetisation

 Definition- revoke the legal tender status of a currency note.

 two times before November 8,2016 monetisation.
 First -1946- RBI demonetised Rs 1,000 and Rs 10,000 notes.
 Second -1978- Morarji Desai- Rs 1000, 5000, 10000.- ineffective- only
15% high denominations exchanged
 people are restricted to withdraw only 2,000 rupees from their account.
  mobile applications like Paytm, Mobikwik - online transactions
 African countries, Myanmar, Australia, Pakistan, UK
 In India majority of the transactions are done in the form of cash
 Why?
1.  Financial Action Task Force (FATF)- higher denomination notes-for
funding terrorism and corruption, money laundering schemes,
racketeering, and drug and people trafficking.
2. black money/parallel economy/shadow economy
 Motives:
1. Curb Corruption
2. Enhance transparency levels in governance
3. Eliminate Counterfeiting/Fake currency:
4. Tackle Terrorism:
5. Eradicate Black Money:
6. Improve digital transactions.
7. Lower Cash-to-GDP ratio.
 Positive Impact:
1. Increase in tax collection:
2. Tackling Black Money:
3. Impacts on terrorism, Naxalism, and trafficking:
4. Increase in digital transactions:  
5. Jan Dhan accounts
 Negative Impact:
1. Poor Planning: reduced money circulation -shortage
2. Economic impacts:
3. Tax Evasion/Black Money:
4. Corruption:
5. Fake notes:
6. Cash-GDP ratio:
7. Agriculture:
 8. Real-estate: major source of black money
9. Banks:
10. Social- Impact
(1) marriages coming to a standstill
(2) issues transacting in the hospitals with old currencies, hence
several deaths registered
(3) pensioners also affected
(4) public inconvenience
11. Stock market:
12. Foreign investors:
 Conclusion:
1. the main benefit that the demonetisation brought about was the
considerable increase in the number of income tax returns filed and
the resultant tax collections. It also led to a formalisation of the
economy.
2. digital transactions have become more common
3. these could have been achieved by other policy initiatives as well and
not necessarily by demonetisation.
4. Tax reforms and effective monitoring of suspicious transactions could
be a viable alternative
5. The impact- felt more in the social sector, worst affected-poor and the
common people.

VOCABULARY:
Clandestinely unaccounted cash buzzing topic
Rein hassles fraudulent practices menace
Unlawful activities surge inconspicuous
https://www.iasexpress.net/demonetisation-merits-demerits-upsc/
https://byjus.com/free-ias-prep/demonetization-of-rs-500-and-rs-1000/
https://www.civilserviceindia.com/current-affairs/articles/demonetization-of-currency.html
https://iasscore.in/topical-analysis/demonetisation-and-black-money