Disadvantages and Advantages of Demonetization

Demonetization is a act of stripping currency of its legal value to just a piece of paper. In which government replaced old currency against new currency to control inflation, corruption etc. Demonetization helps a nation to be a change and increased the GDP. It also make country digital and cashless which is better for a developing country. Let us learn some of the Advantages and Disadvantages of Demonitization.

Advantages of Demonetization

Cashless Economy:

When there is a shortage of currency in the market many dealer and retailer opt cashless facilities to run the day to day business. Cashless society is a gesture of developing nation and also kept safe from corruption. Nobody save physical money everyone go cashless which lead to end the black money.

Interest Rates:

Interest rate at the time of demonetization fall very low and bank have to cut their interest rates competitively low, so people can easily get a loan without having any issue. Government also emphasis bank to drop their interest rate so that common people can get loan and money flow in the market.

Black money Eliminated:

The biggest advantage of demonetization is that it helps the government to track people who are having large sums of unaccounted cash or cash on which no income tax has been paid because many people who earn black money keep that money as cash in their houses or in some secret place which is very difficult to find and when demonetization happens all that cash is of no value and such people have two options one is to deposit the money in bank accounts and pay taxes on such amount and second option is to let the value of that cash reduced to zero.

Increased Tax revenue:

The main objective of demonetization is to curb black money. Curbing Black Money Demonetization has made it mandatory for every person in India to deposit their old currency in the banks and exchange them for new currency. This will make the cash hoarders to deposit their money in the account and make it accountable. In this manner, black money will be retrieved to a certain extent.

Disadvantages of Demonetization

Cash Crunch:

Due to demonetization, availability of cash in the market will be very less because every currency should be deposited in the respective bank and till the time bank reissue the new currency against old, so ultimately the new currency will be very less in the market. This will effect the major industries in order to run efficiently without enough cash.

Economy Slowdown:

Without Cash in the market many industries like real estate, Infrastructure, gold etc. have been affected, which lead to slowdown the growth of economy of a country. Where as many transaction halts due to insufficient cash flow in the market, so there is no sales or any monetary transaction till everyone get enough cash to do so.

Real Estate:

As people don’t have cash or adequate amount of money with them they don’t buy any land or plot for their house. Real Estate business become very low and that will affect the economy of the nation, which lead to inflation and constantly fall in GDP.

Corruption At Different Level:

Government takes a bold and courageous step of demonetization to eliminate poverty, inflation, corruption and to increase the GDP, But instead of removing corruption completely there is corruption at another level by every person doing money laundering.

Re-calibration of ATM’s:

Re-calibration of ATM’s is not done at pace it should be done, which lead to long queue and take more time to get our own money back. due to very slow procedure many people suffer serious problem. Every one has their own job and problem so they have deal with it anyhow.

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