On November 8, 2016, Prime Minister Narendra Modi had announced the demonetization of banknotes of Rs 500 and 1,000. The announcement meant that the banknotes in the denomination of Rs 500 and Rs 1000 issued under the Mahatma Gandhi Series were withdrawn from circulation and were no longer considered legal with immediate effect.
November 8, 2021, marks the completion of five years of demonetization. There were several reasons for the government to introduce new notes in order to push a few things for a better future.
Here are some benefits of Demonetization:
- The introduction of demonetization forced citizens to move out of their comfort zones move towards digital payments. Demonetization led to a permanent increase in the use of digital transactions, especially among the young. Even two years after the event, those who switched to digital transactions have not returned to cash payments.
- The total number of counterfeit notes detected decreased sharply post demonetisation. With fewer counterfeit notes, the scope for terror financing reduced drastically. In 2016, 6.32 lakh counterfeit pieces were seized across the country. In the next four years, a total of 18. 87 lakh pieces of fake notes have been seized across the country in various denominations, according to the RBI data.
- Demonetisation has made India a lesser cash-based economy. At the end of the financial year 2015-16, Rs. 16.41 lakh crore worth of notes were in circulation, registering a YoY growth of 14.51 per cent over 2014-15. At this rate, notes in circulation would have been increased to Rs.32.62 lakh crore by end of 2020-21. However, it increased to much less, Rs.28.26 lakh crore by the end of 2021.
- One of the main purposes of demonetization was to curb black money. Black money refers to cash that is not accounted for in the banking system or cash for which tax is not paid to the state. Most black money was high-denomination notes and since these were declared illegal, black money was also declared null.
