DemonitiZation and Re-introDuction Nov 2016!!

Now every Individual will make a Difference

Rs.500 and Rs.1000 not a legal Tender any more

Even if Narendra modi has shocked the nation on 8 November, 2016 by declaring demonitisation of INR 500 and INR 1000. But this step by the prime minister is not a new step taken in the the Indian economy. India has pulled select denominations twice before.

First demonitisation was  when Rs.1000, Rs.5000 and Rs.10,000 was taken out of circulation in January 1946.Demonitisation was again taken a  turn during the tenure of Morarji Desai in January 1978.According to the RBI data, Highest denominated notes ever printed were of Rs.10,000 in the year 1938 and Year 1954 which got out of circulation in the demonitisation strategy of the year 1946 and year 1978.

Rs. 1000 note made a comeback  in november 2000 and Rs.500 was introduced in october 1987.

However, this is the first time that the new currency note of Rs.2000 is introduced.

Talking about the impact of this demonitisation on the indian economy

Even in 21st century ,also rural areas getting covered within the ambit of banking network, Online banking getting stalked, Money laundreing( oldest form of the business is still in effect in many areas)generating money which is unaware to the main stream running economy. This amount was actually in circulation leading to the increase in demand with no corresponding increase in the Production leading to Inflationary state.

Though, Raghuram Rajan's tenure has stabilised the inflationary state,Action taken by the Indian government on 8th November, 2016 will either compel people to destroy  or Deposit the unaccounted money which could affect the economy.

No matter, if they found way to make their money legal or not, they have to pull out all the money that is not under the account of indian government. As the Circulation of the money will be reduced, The inflation rate will also come down. This is called as deflation.

Even if there is a down turn to it, sooner or later it will get  balanced out. This could be the reason why higher denominated rupee is been introduced.

Specimen of New notes soon to get circulated.

Although many people are of the view that introduction of Higher denominated rupee would act as a Reset Button in generation of Black money, as it will get easier  to hoard the cash utilising half the space.

However, In the RBI and finance ministry Press conference economic affairs, secretary Shaktikanta Das carefully noted that the central bank would cautiously 'Monitor and regulate the issuance of Rs.2000 notes in the future'. This means its unlikely that the Rs.2000 notes will be issued in large numbers. More details on this are awaited.