Economics behind demonetization of Rs 1000 & 500 notes in India.

Here’s an analysis of the Government of India’s move to demonetize old Rs 1000 & 500 notes.

##More Money Deposition in Banks.

Stagnant money lying in houses (undisclosed & not black money) will get into the banks. It will lead to surplus money in the banking system (the same thing was done through Pradhan Mantri Jan Dhan Yojma (PMJDY), Gold Monetisation Scheme (GMS)- brought more money in the banking system). It will in turn lead to lower loan rates. So, people will make more investments due to lower loans. Hence, more businesses will prosperous leading to more jobs & employment in the long-term.
More money in the banking system will solve the problem of ailing of banks due to NPAs (Non-Performing Assets).

RBI_Reserve Bank of India_wiki

##Cashless Economy.

As per some credible reports less than 5% of Indian population pays Income Tax. So, moving from cash transactions to cashless transactions will bring more people into the bracket of tax-payers & hence it will curb tax evasion.

More revenues to government which means it shall spend more on social security & developmental programmes. So, it’s impact shall be far-reaching.

It will also become difficult to hide money due to less cash transactions leading to healthy economy.

 ##Curbing Fake Currency

It will put a check on circulation of fake currency in the economy. Hence, it will help in making economy more vibrant & conducive to trade & commerce.

P.S. 1. The measures will definitely result in positive outcomes over time.

P.S.2. Moving towards cashless transactions will lead to Transparency .

With Great Love,

Er. Amit Yadav


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