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Q. Inconvenience caused due Demonetisation: Discuss the inconvenience caused due to recent demonetisation of high value currencies.
Nov 15, 2016 Related to : GS Paper-3

Ans :

Introduction -

Recently Government of India has demonetised the high value currencies of Rs. 500 and Rs.1000. The objective behind the demonetisation of high value currencies is to curb the black money, counterfeit currency, and terror financing. Though demonetisation has very good objectives, but is has caused some inconvenience to the people. 


Inconvenience caused due Demonetisation-

  • After demonetisation of high value currencies we have witnessed the long queues that people waiting outside the banks and ATMs across the country over the last five days has created an inevitable consequence.

  • The decision to demonetise notes of Rs.500 and Rs.1,000 has made 86 % of the value of notes in circulation turns suddenly invalid, hence a certain degree of disruption and pain is unavoidable. 

  • But the question is whether this chaos could have been anticipated and managed better than it has been, because replacement of the demonetised notes is a time-consuming exercise and it requires planning of the highest order.

  • The experience of the last few days shows that preparation is somewhat lacking and the transition could have been handled much better in a planned way. 

  • Similarly ATMs are running out of cash quickly while banks are dispensing more of the Rs.2,000 notes than those of lower denominations, but there is not enough smaller currency to make an exchange, hence it caused more trouble to common people. 

  • Also the cash crunch of the last few days is certain to have an adverse impact on consumption spending, especially in the rural areas, with the resultant effect on the economy in the third quarter.

Analysis

  • After initial days experience and to ease the pressure on the systemthe government has increased withdrawal limits, and allowed for petroleum outlets and hospitals to accept the old series of notes for another ten days and also and it pushing more cash through post offices.

  • Demonetisation of high value currencies has major impact on black money and other illegal activities. Similarly it will curb corruption as well terror financing.  

  • It is true that it has created inconvenience to the common people to some extent, preparation to such high might have leaked the issue, which intern have hampered the objective of demonetisation.

  • But it is never an easy task for the Reserve Bank of India and the Centre to strike the right balance between secrecy and storing adequate quantity of notes for quick distribution.

  • Hence for larger objective and fight that intended to curb black money, terror financing etc, a small inconvenience is inevitable.  

Conclusion-

The fight against the black money through demonetisation will have long lasting impact. It is true that it has caused some trouble to common people, but for larger goal some extent of inconvenience is inevitable. Now having some experience of initial reaction, now government is has made several relaxation to ease the pressure.  It may take some time to return back normal situation, till then people needs to adjust for larger goal.     


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