It is a transformation decision taken by the government to ban Rs.500 and Rs.1000 notes from circulation in the market. Obviously, there will be Pros & Cons of Demonetization on software development industry and other industries as well. The decision was taken to minimize the black money and corruption. The RBI will be issuing Rs.500 and Rs.2000 notes from today onward. They have released a statement by saying that all the Rs.500 and Rs.1000 notes are to be deposited at nearby banks or post-offices. This will be a regular currency circulation all throughout India.
PROS & CONS OF DEMONETIZATION
All those people who are panicked with this move by the government need not worry at all as the government has assured that Your money will be yours. You will not lose anything so there is no point in being scared. There will be no restrictions on non-cash payments by cheque, demand draft’s, and electronic fund transfer.
IMPACT OF DEMONETIZATION
Inflation: It will cause deflation in the market as people who have earned money through illegal ways would be afraid to declare the money as they may be prosecuted by the Income-tax department on the legitimacy of their income.
Reduction in Monetary Circulation: This will lead to the reduction of money circulation in the economy leading to deflation. The value of money will be increasing which we have because the total money supply will be going down but the commodities and things available in the market have not gone down. It will lead to inflation slowly but not overnight.
Cash Deposits in Banks: A lot of cash, which is legally earned, will be deposited in the banks and now the banks with more deposits will be able to do more lending.
Easy Loans: Loans will become easier and interest rates may come down. As banks will have more money so more loans will be given out which will increase the money supply in the market and it will create inflation.
As we discussed, there will be Pros & Cons of Demonetization. Here are some of the advantages.
- The major decision, which is made by the government, will help us to eradicate black money, corruption to some extent.
- Due to lack of funding there will be no arms smuggling and all the terrorist activities will also be choked.
- The government has proposed the new limits on ATM withdrawals being restricted to Rs.2000 per day, withdrawal from the bank account is Rs.10000 a day and Rs.20000 a week. It indicates that card transactions will slowly replace the cash transactions in our daily prone activities.
- Exchange of money in banks can only be done producing a valid identity card like PAN, Aadhar card, and electoral card from 10 to 24 November with a daily limit of Rs.4000. By doing so it will be easy for the government to track the money, which is being exchanged in banks. There is no limit if the amount, which we are exchanging, is legal amount.
- Financial Intelligence Unit will track all details of the transactions from the banks. So now it is really difficult to get rid of the black money.
- Real estate industry is totally corrupted and now by this stringent decision, the real estate sector will bring in more transparency. By doing it in this way we will have more credibility, making it more attractive to the foreign investors as well as domestic investors.
EFFECTS ON INDIAN IT SECTOR
- It will push India for Digitalization and Digitalization will make Indian IT sectors more strong. As per our experience, we get 50-60 contracts for Application development and payment gateway integration in a single month after Demonetization. So yes, its great for Indian IT sector to get business from local market.
- Some small and Medium IT company have change to grow their business with help of local market.
- Best part of Demonetization is its push our country to do digital payment. Digital Payment is Secure and safe than Cash Payment.
As we discussed, there will be Pros & Cons of Demonetization. Here are some of the disadvantages.
- It will cause great inconvenience to common man who will start running to bank to exchange Rs.500 and Rs.1000 notes.
- By replacing all the Rs.500 and Rs.1000 denomination notes, as ordered by the government, could cost the RBI at least Rs.12000 Crore.
- It will be very difficult for half of the population who are not well versed with the card transactions.
- The major problem is that big fishes will be left out. They had black money in the form of foreign currency, gold, and property and stashed in tax havens.
Consequently, the advantages are much dominating. It will be in the long-term interest of our country comfortably outweighing the disadvantages. The government needs to take all the necessary steps so as to ensure that there will be a smooth flow of currency exchanges. If you have more Pros & Cons of Demonetization, please do share it with us. We would be happy to update the article.
Furthermore, it would turn into chaos if the government takes no necessary steps to circulate money correctly. It will make a massive change in our economy. Finally, we congratulate the entire government and those hidden brains of our democracy that brought this decision.