DEMONETIZATION:PROS & CONS Advantages|Disadvantages|Causes|History


1.What is demonetization?

Demonetization is a procedure by which a progression of money won’t be legitimate delicate or the particular series of notes become invalid. The arrangement of cash won’t satisfactory as legitimate money. A similar thing occurs with the Rs. 500 and Rs. 1000 note demonetization.


Some of the major causes in any economy of demonetization are:-

  • Black money
  • Currency storage
  • Fake/illegal currency and

 Induction of new currency.   

Excess illegal currency in the economy is the key factor of demonetisation.

3.What Happened on Demonetization?

  • On 8th Nov. 2016,the Prime Minister of India declared the demonetization.
  • 500 and 1000 rs notes are banned or are restricted in use.
  • Only Banks and Post offices are allowed for currency exchanges of these denominations.
  • Currency is to be replaced with new notes of 500 and 2000 rs notes by 30th Dec.

4.Demonetization History and Background In India?

  • The first demonetization was in 1946 and the second was in 1978 which banned regulation of 10000 ,5000 and 1000 notes.
  • Highest denomination note till date issued by the RBI was the Rs 10,000 note in 1938 and agin in 1954. And these  were demonetized in 1946 and again in 1978.

Demonetization Pdf - Pros and Cons of Demonetization Rs 500,1000

The move was then legitimized as endeavor to contain the volume of banknotes available for use because of inflation.


  • Black money holders are in great loss.
  • Unethical/illegal rackets related with vast use of fake currency is knocked down.
  • Exchange of illegal drugs and arms get trashed.
  • Funding of terrorist groups has been certainly stopped.
  •  Terrorist ,Maoist Organization suffered shortage of funding.
  • Transperency in exchanges.
  •  Huge Donations of money minded people came to notice.
  • Turning towards the cashless economy.


  • Rush in banks
  • Shortage of money and cash.
  • Short term inflation.


The greatest preferred standpoint of demonetization is that it causes the legislature to track individuals who are having extensive entireties of unaccounted money or money on which no salary impose has been paid in light of the fact that numerous individuals who gain dark cash keep that cash as trade out their homes or in some mystery put which is exceptionally hard to discover and when demonetization happens everything that money is of no esteem and such individuals have two choices one is to store the cash in ledgers and cover regulatory obligations on such sum and second choice is to let the estimation of that money diminished to zero.

Another advantage is that because of individuals uncovering their wage by saving cash in their ledgers government gets a decent measure of duty income which can be utilized by the administration towards the improvement of society by giving great foundation, healing centers, instructive establishments, streets and numerous offices for poor and penniless areas of society.

Since black cash is utilized for illicit exercises like fear mongering financing, betting, tax evasion and furthermore swelling the cost of significant resources classes like land, gold and because of demonetization every single such movement will get lessened for quite a while and furthermore it will take a very long time for individuals to produce that measure of dark cash again and thus in a way it helps in putting an end this hover of individuals doing unlawful exercises to acquire dark cash and utilizing that dark cash to accomplish more illicit exercises.


The greatest impediment of demonetization is that once individuals in the nation becomes more acquainted with about it than at first for few days there is confusion and free for all among open as everyone needs to dispose of demonetized notes which thusly now and again can prompt peace issue and disorderly circumstance particularly in banks and ATMs which are the main medium to change the old money units to new cash units.

Another drawback is that demolition of old money units and printing of new cash new units include costs which must be borne by the legislature and if the expenses are higher than benefits at that point there is no utilization of demonetization.

Another issue is that dominant part of times this move is focused towards dark cash yet in the event that individuals have not kept money as their dark cash and pivoted or utilized that cash in other resource classes like land, gold et cetera then there is no certification that demonetization will help in getting degenerate individuals.

Deaths due to Demonetization:-

A few people were accounted for to have kicked the bucket from remaining in lines for quite a long time to trade their old banknotes. Deaths were likewise credited to absence of therapeutic help because of refusal of old banknotes by hospitals. As of 15 November 2016, the ascribed loss of life was 25 and 33 passings starting at 18 November. In a meeting, Chief Minister of Delhi Arvind Kejriwal lashed out at a BBC correspondent who requesting that he legitimize his 19 November guarantee that 55 passings were connected to demonetisation. By the year’s end, resistance pioneers asserted that more than 100 individuals had kicked the bucket due to demonetisation. In March 2017, the administration expressed that they got no official write about passings associated with demonetisation.

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