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सेमिनार: अंग्रेज़ी सीखने का अवसर (23 सितंबर: दोपहर 3 बजे)
Q. Demonetisation and Black Money: Discuss the impact of recent demonetization on black money in India.
Nov 14, 2016 Related to : GS Paper-3

Ans :


Recently Indian government has demonetized the high value currencies i.e currency notes of 500 and 1000 with objective to unearth the black money, and to curb the corruption, counterfeit currency as well as terror financing. This decision was considered as biggest cleanliness drive against the black money in the history of Indian economy. But there is various view of experts on demonetisation, as some argues that it will will hit the black money and other argued in negative.

How it will curb black money-

  • In India all sections of the society are accustomed to use cash transactions, and this habit is unscrupulously misused by some bad elements of the society. Such habit resulted in even people with accounted money are started using cash transaction for high value transactions.
  • It is resulted into parallel economy with unaccounted money, even much stronger than regular economy. The parallel economy black money, corruption, counterfeit currency and terror financing. These issues hampered growth and development of the economy.
  • In this background demonetarisation of Rs 500 and Rs 1,000 currency notes as a master stroke, as the move will address issues like black money and corruption and also help the economy become more digital.
  • The move will either unearth the black money slashed in the form of cash or forces to destroy those unaccounted currencies. Demonetisation will curb the menace of black money and will help check stashing of funds to a large extent.
  • Similarly it has major impact on corruption that exists in India and also on financing of terror activities in India. Hence it was considered as courageous step in the fight against unaccounted money.

Some argues against of it-

  • Currently high-value currency notes accounts for the value of 86% of the notes in circulation in India.
  • According to some estimates the size of the black economy in India range from 20% to 60% of GDP and more and the currency in circulation is just 12% of GDP. 
  • Even if more than 50% of money in circulation is black money, but most of it will find its way back to the banking system one way or another, and be recycled as new notes. 
  • According to some experts, the black money holders, tax evaders and corrupt official may not slash these money in cash in their homes due to sheer scale of logistics.
  • Generally many viewed that tax evaded income mostly invested in companies, real estate and these people may not be affected due to demonetization.
  • Hence these experts argue that, demonetisation may not yield desired results against black money, rather it creates inconvenience to the general people. 


Central government’s recent decision to demonetise the high value currency is one of the major step towards the eradication of black money in India. The demonetization drive will affect some extent to the general public, but for larger interest of the country such decisions are inevitable. Also it may not curb black money fully, but definitely it has major impact in curbing black money to large extent.

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