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Advantages and Disadvantages of Demonetization Policy


On the date of 8th November our honourable Prime Minister Narendra Modi declared demonetization and banned all existing Rs500 and Rs1000 notes with an intention of pushing black money from its roots. This move has led to some merits and demerits same as a coin which has two sides. Adaptation is key to evolution. When adaptation becomes mandatory it becomes revolution. By the end of this demonetization phase many Indians will move towards cashless economy. This thing is said by many people and some say exactly the opposite of it. So, who right?? So, let's know first what demonetization means.

Demonetization refers to discontinuing of current currency units and replacing those with new currency units. To go deep in the world of demonetization we need to know about its advantages and disadvantages. The biggest advantage of demonetization is that it helps the government to track people who are having large sums of unaccounted cash in their houses or some other secret places and due to demonetization their notes become "pieces of paper". The biggest disadvantage of demonetization is that once people in the country gets to know about it than initially for few days there is chaos and frenzy among public as everybody wants to get rid of demonetized notes and this is what is happening today. Now this was the disadvantage so now let's talk about its one more advantage. A ban is imposed on illegal activities like gambling, terrorism funding, and money laundering and inflating the prices of major assets just because of DEMONETIZATION. For sure if there is advantage so you know there will be disadvantage too. Majority of times this move is targeted towards black money but if people have not kept cash as their black money and rotated or used that money in other asset classes like real estate, gold then there is no guarantee that demonetization will help in catching corrupt people.

Its truly a major decision because overnight all the money you have become a piece of paper which has no value if you do not exchange it with new currency units or deposit it in the banks. Some mediocre have suffered with this as they must stand in lines for whole day leaving their all-time job. But everyone is quiet as everyone knows this will most probably result good. Another disadvantage is that destruction of old currency units and printing of new currency new units involve costs which must be borne by the government and if the costs are higher than benefits then there is no use of demonetization. Businesses suffer since they do not have liquid cash to make critical transactions. For sure the arguments don't end here; there are some interesting points which are very important to be cleared.

After demonetization ways are shared on social media to turn black money to white with which there is no use of demonetization. There are pros and cons of demonetization of Indian currency. But whenever such orders are passed the common man is in trouble. But he doesn't understand there many that are introduced by our prime minister to make public feel convenient. He also gave a time limit and places where these demonetized notes will continue to be used so that public must not feel inconvenient at the time urgency. At Government hospitals, post offices, petrol pumps, authorized milk booths, gas stations and many places and that's the separate thing now these notes are not even used at these places but he gave a time limit for public convenience. All national highways tolls were freed for common man till 2nd December and free treatment was declared under Rs.500 in AIIMS. Moreover, after 31st December these notes will not be exchanged in banks too. So now at last I would like to say that everything in this world have both its disadvantages and advantages too. It is up to the government to see and analyze all the pros and cons and then decide whether it is beneficial to go ahead with demonetization or not.

- Ridhima Chhabra