Demonetization, I had heard this word for the first time in my life. Though I am a B.tech graduate and our economic teacher many time used some jargons like devalue and depreciation of currency, but new one added is demonetization. I couldn’t change the channel when our favorite prime minister was announcing about demonetization of bigger denomination currency. As of now I understand the concept of demonetization and its effect on economic world.
A Master stroke played by Indian government on 8 November when Mr. MODI ( maker of developed India) has announced to ban 500 & 1000 notes. I’m seeing it as one cure to many deceases like Curruption, Black money, Duplication of currency, Terrorist funding, and Tax payment.
Starting from black money which has been very well explained by Economic giant Professor Pradeep Mishra in his recent blog at leadertocreator.blogspot.com. Just having a look on their blog
How do you know when you suffer with a tooth ache? Newspapers, TV Channels or much hyped social media? Obviously not. You know it because you feel it. India faced economic crisis several times but most of the Indian’s never felt the heat in general. Since poor guys are always in economic crisis. Rest of them have enough money, Remaining have black money.
So what is black money? If I ask you, how much money you have? You answer INR 100/- but at your home you have another INR 500/- which was not part of any legal transactions. So may be for different reason (Income tax is just one of them) you disguised that amount. So if you spend your disclosed INR 100/- the Government understands you are bankrupt but really you are enjoying in bar with undisclosed INR 500/- This money is black money. So all un-accounted money is black money. Fake and duplicate currency is Extra cheese.
How does it Impact? Black money is generated by several means but thumb rule is the income which is unaccounted and undisclosed. Black money is equally valued and purchasing power is same so most of the people buy things with that money (For example real estate) by this a demand for the product / services is created. Prices of product /services will go up as demand increases. Stand up economists call it Inflation or general price rise. On positive side economic activity gets a unhealthy boost. Factories produce more to meet demand. Honest people suffer most as the prices slowly move beyond their paying capacity. On the other hand Government is in shock as only few people starts eating bigger slice of pizza.
Demonetization: People who have black money, kiss their currency denomination several times a day as they add millionaire, billionaire after their name and think that they are on top of the world Life has different plans nevertheless. While this romance was on suddenly prime minister announced that these currency notes of INR 500 and INR 1000 are just piece of papers and bears no value after midnight. The dreams of millions shattered and fear crept in. So currency note as it is, where is, become useless in just a minute. We tried other methods like teaching “Moral Science” in schools but it simply didn’t work.
Why new currency in INR 2000 denomination? This was mandatory to meet with cash crunch situation however one more reason of introducing new denomination was: Suppose I have black money INR 5000 in denomination of 1000. Depositing the same in bank one note everyday and by withdrawing by evening in regular currency note. Repeat the same everyday my entire amount is in new currency tenders/ denomination and bank knows only one note rotating everyday. Simply fooled the system. If I am given new currency I am unable to repeat the same…Think.
Impacts : As what could be the possible application and uses of computer is still unknown and being explored so is the demonetization. If I tell you that by successful implementation of this India will not be the same as it was before 8th, you may not believe. So stay hungry and stay in touch……