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Enumerate the political social and economic impact of demonetization


PM Modi has taken with the very strict step against to the corruption and black money in India. The government of India on 8 November 2016, The PM Shri Narender Modi Ji decided to take this step again corruption and black money from India. An important move the government of India the 500 & 1000 hundred notes will no longer be legal tender from midnight. The RBI will issue new 500 and 2000 Rupay notes in market.

The Rs.500/- and Rs.1000/- notes and it will replace by new Rs.500/- and Rs.2000/- notes. It will take time to normal the situation in all over India. Temporarily stall the circulation of large volume of counterfeit currency and curb the funding of anti social element like smuggling, terrorism etc

Effect on money supply

The money circulation does not complete in market. The old note will not valid. It will stop the black money from market. The people will not use small amount note for transaction. They will use cheque, online payment, DD, Money order facilities

Effect of Demand

Overall demand is expected to be affected to an extent in particular area like consumer goods, real estate and property, good and luxury goods.

Effect of prices

Price level is expected to be lowered due to moderation form demand side. Consumer goods prices are expected to fall only marginally due to moderation in demand as use of cards and cheques would increase for some purchases. Real estate and property prices in this sector are largely expected to fall.

Effect on various economic fields.

Agriculture and related sector, Retail, small traders, SME, service sector, household, political parties, Professional like doctor, carpenter etc. Note banning problem specially affected the village, small cities and rural people so much affected by this monetization. Because in rural are village does not use cashless transaction. They totally depend on cash

Effect on Banks

This step automatically effected to bank, the crowd of people standing in front of bank & ATM. This will automatic lead to more amount being deposited in saving and current account. This turn will enhance the liquidity position of the bank. The PM Shri Narender Modi ji (Jan- dhan yojna scheme now is working). According the media source and Newspaper, the 64,230cr amount has been deposited in Jan - Dhan yojna scheme.

Effect of online transactions and other modes of payment

Now the urban and metro cities are using cashless transaction by online payment, net banking, debit / credit card and E-wallet in market. The paytm playing very good role during this monetization time.

Political approach

towards the monetization is different. Every National political party and state and local political party are against this BJP government order. These all are telling that this is the monopoly of BJP party. BSP in UP, AAM party in Delhi and etc. are against this order.

According to media report, The BJP government taken this decision for UP election and BJP have also target of 265+ seats in UP election. But result totally depends on people.

But this notes ban decision will play very important role during election time. Many political party estimation and budget and balance election fund has been fall. After this decision to purchase vote by money, distribute the party ticket in big amount, distributing the cash and liquor (alcohol) in village and urban area. Everything will be stop. Anti-socialist activities will be automatically stop.

- Sanyog Varshney