4 days ago, the government has launched new currency and abolished the previous one for attacking unaccounted money. Most of the people of our country are appreciating this bold decision but opposition parties are criticizing it by every possible means. So many columnists, economist, and scholars are trying every bit of their knowledge to prove that this is not going to tackle black money and it is just creating a chaos among people. Yes, I agree that this is not going to reduce corruption in near future or completely wash out black money from our economy but definitely, it will curb out a large amount of unaccounted money in form of cash.According to some reports, approx 25% of India's wealth is in form of black and out of which a larger share is in form of Estate, Gold and Foreign Currency. But still, some part of this is in form of cash which is going to be washed out by this move.
This step is taken only for eliminating current stock of black money not for all modes of black money. The government should take other measures too and they have already taken some steps like GST, JanDhan Yojna, Gold Monetisation Scheme, Benami Property Act, Aadhar Card, Direct Benefit Transfer etc. The Government has taken all these measures in last 3-4 years step by step and it will definitely show positive results in near future.
Now coming to current state of economy, most of the people is saying that a large amount of black money can be easily converted into white money because limit of deposit by one person is 2.5 lakh so if a person who has a large stack of unaccounted money, will ask his friends to deposit small packets of money in his account. Yes, it is possible and acceptable but by this, a large amount of money will come into circulation and will be available for investment by industries in near future which is good for a healthy economy. Again this method of depositing money will be helpful only for small players not for big buffaloes.
So finally I can say that this demonetization scheme is going to help our economy as it is going to increase the money supply in the economy. It means more money will be available to people.
Further, some people are criticizing the decision of introduction of higher denomination note by quoting foreign countries and their policies. So for them, I can say only that our economy is so large that at the current state, a lower denomination currency can not hold day to day transaction. Right now. more than 40% people of our country have no bank account and among those who have bank accounts, a large number of people are not using credit/debit card for payments. According to RBI data, cash still accounts for 90 per cent of all monetary transactions in India. So we need higher denomination currency. 1000 rupees note is not enough to handle the economy in next 4 to 5 year so the government has to launch a higher denomination note for proper handling of cash transactions. Further, there is heavy transaction costs involved for banks with lower denomination notes than higher denomination note. I agree that there is a risk of black money generation with higher denomination notes but we are not in a position to eliminate them completely.
The government should put all efforts to promote use of credit/debit cards, e- wallet, Net Banking and mobile money among middle class. It will help our economy in becoming the world's largest cashless economy in near future.
This step is taken only for eliminating current stock of black money not for all modes of black money. The government should take other measures too and they have already taken some steps like GST, JanDhan Yojna, Gold Monetisation Scheme, Benami Property Act, Aadhar Card, Direct Benefit Transfer etc. The Government has taken all these measures in last 3-4 years step by step and it will definitely show positive results in near future.
Now coming to current state of economy, most of the people is saying that a large amount of black money can be easily converted into white money because limit of deposit by one person is 2.5 lakh so if a person who has a large stack of unaccounted money, will ask his friends to deposit small packets of money in his account. Yes, it is possible and acceptable but by this, a large amount of money will come into circulation and will be available for investment by industries in near future which is good for a healthy economy. Again this method of depositing money will be helpful only for small players not for big buffaloes.
So finally I can say that this demonetization scheme is going to help our economy as it is going to increase the money supply in the economy. It means more money will be available to people.
Further, some people are criticizing the decision of introduction of higher denomination note by quoting foreign countries and their policies. So for them, I can say only that our economy is so large that at the current state, a lower denomination currency can not hold day to day transaction. Right now. more than 40% people of our country have no bank account and among those who have bank accounts, a large number of people are not using credit/debit card for payments. According to RBI data, cash still accounts for 90 per cent of all monetary transactions in India. So we need higher denomination currency. 1000 rupees note is not enough to handle the economy in next 4 to 5 year so the government has to launch a higher denomination note for proper handling of cash transactions. Further, there is heavy transaction costs involved for banks with lower denomination notes than higher denomination note. I agree that there is a risk of black money generation with higher denomination notes but we are not in a position to eliminate them completely.
The government should put all efforts to promote use of credit/debit cards, e- wallet, Net Banking and mobile money among middle class. It will help our economy in becoming the world's largest cashless economy in near future.
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