Government steps towards demonetization was a big and bold step to attack the corruption, black money and also the most important was stopping funding of activities to terrorism. Great step of government ended up causing chaos among the common people of the country and suffering to small businessman and traders due to cash crunch. Many serpentine queues of people can be seen outside banks and ATMs where people are busy in exchanging the old notes and withdrawing new currency of Rs. 500 and Rs. 2000.
It was found that around one percent of the population have deposited 65% of the money which can be estimated around Rs 12 lac crore. They are now being investigated by the Income Tax Department. It can be seen that they have let go their currency notes instead of depositing the currency notes in the banks. It can be construed that our Prime Minister Modi Ji has made a money out of all these allegedly illegitimate holders of black money.
These all leads to rise of cashless economy and also spread of digitial payment culture can be seen among people which willhelp in the growth of economy. It will eradicate the use of physical cash in the market and once the bulk transaction are digitalized it will result in revealing the expenditure made by individuals to the tax authorities especially the big transactions.
If all the traders can be brought up under the digital payment system, the unorganized sector transaction can be made accountable. Though it is a slow process but it can play a vital role in reducing the black money. When people know that their account and transaction are easily traceable and legal steps can be taken up against them, people will averse to deal with the black money.
As a result of demonetization, many new tax payers may appear as demonetization will reveal their income size and tax official may check them in future, compelling to pay tax. Some experts state that though people have welcome the government step of demonetization but it has effect the economy on negative side. Expert saying may be true but in a long run it will have positive effect on economy.