Demonetization-(Making a currency unit, illegal for tender)
Introduction:
On 8 Nov 2016, the Indian Government announced that the 1000 rupees and 500 Rupees notes will become illegal for tender; Prime Minister Narendra Modi has addressed the nation in an unscheduled speech on Television, in that speech Modi said 500 and 100 Rupees notes will become invalid, from midnight of 09 Nov 2018. The new 50 and 2000 currency notes will be distributed in exchange for old 500 and 1000 Rupees notes through Banks, Reserve banks, and Post offices.
The aim of the Government is to bring the tax evasion money back to the government treasurer and to encourage the cashless transaction in the nation.
Immediate Effect of Demonetization:
National Stock exchange and Bombay stock exchange fell over 6% on the next day of the announcement. People started standing in a long queue at ATM. People started standing in the long queues for depositing the Rs.1000 and Rs.500 notes and for the exchange of old Rs.1000 and Rs.500 notes for the new Rs.500 and Rs.2000 Rupees notes, at the entrance of the Bank and post office. Police are also there at the entrance of the bank for controlling the crowds. few cases were reported that old aged peoples died as they for a long time in the queue is the sorriest thing accured. Bank Employees have also raised the concern of an increase in their working hours and workload.
Rules for depositing old currency Notes:
Reserve bank of India announced that old Rs.500 and Rs.1000 notes can be deposited in banks till 31 December 2016 only. The government has also extended the time for the deposition of old currency notes with a restriction, that they can be exchanged at RBI only till 31 March 2017.
Rules for Exchange of old Currency notes:
The Limit for the exchange of old currency notes to the new currency notes (Legal Tender) is Rs.4000/-, per person per day from 08 November 2016 to 13 November 2016, which is increased further to Rs.4500/- per person per day from 14 November 2016, and suddenly reduced to Rs.2000/- per person per day from 18 November 2016. Facilities have been made for foreign tourists and outbound travelers to exchange their old currency notes at the International Airports,
The Exchange of old currency notes for the new notes has been put to an end with the effect of 25 November 2016.
Cash Withdrawal Limits:
The cash withdrawal limit for a bank account is limited to Rs.10,000 per day and Rs.20000 per week from 08th November to 13th November 2016. Which is extended up to Rs.24,000 per week from 14th November 2016 Onwards.
The Daily Cash withdrawal limit from ATMs, is limited to Rs.2000/- from 08 November 2016 to 14 November 2016, and the limit is increased to Rs.2500 per day till 31 December 2016, the limit is further increased to Rs.4500 per day from 01 January 2017 and to Rs.10000 from 16 January 2017, Finally, RBI has increased the Withdrawal limit of Savings account to Rs.50000 on 20 February 2018.
Demonetization effect on Indian Economy:
The Economy depends upon the Market, the market is a place where the product is sold by the Manufacturer and the product is brought by the customer (i.e., the place where both the selling and purchase happens), the cash flow is very essential for a people functioning and growth of market, demonetization has created a fear among the people that they will go cashless in the coming days, due to this fear among the people (public), They have started saving the money for their basic needs such as food, education, etc., and they have temporarily stopped buying costlier goods and articles. Due to these acts by the people (public), the manufacturer can't sell the product in the market, and thereby the GDP growth is decreased by 6.1% in Jan 2016 to Mar 2016 quarter, The GDP growth of the Fiscal year is reduced to 7.1% when compared with 8.0% GDP growth in the previous fiscal year, GDP growth for April 2017 to June 2017 is decreased to 5.7% in comparison to 7.9 % GDP growth in the previous year. Economists reported that Demonetization is a reason for the sudden decline in GDP growth.
However Indian GDP growth is back on track in the third quarter of the fiscal year 2017 - 2018, the GDP growth for the third quarter of the Fiscal year 2017 - 2018 is 7.2%. Is good news.
Conclusion:
99% of banned currency notes has been deposited in the banks by August 2017, which is equal to 15.28 lakh crore. The leading analysts and economists have stated that the Demonetization has failed to move the black money back to the government treasurer.