Impacts of demonetisation in indian context. Write positive and negative impact.

Demonetization is the act of withdrawing a particular form of currency from circulation, usually done by a government in order to replace it with a new or updated currency. In 2016, the Indian government demonetized certain denominations of its currency, specifically the 500 and 1,000 rupee notes, as part of an effort to combat corruption, black money, and terrorism. This policy had both positive and negative impacts on the Indian economy and society.

Positive impacts of demonetization in India:

1. Increased tax compliance: One of the goals of demonetization was to reduce the amount of "black money" in the economy, which refers to income that is not reported to the government and is therefore not subject to tax. By demonetizing certain denominations of currency, the government effectively made it difficult for people to hold large amounts of undeclared income in cash. This led to an increase in the number of people reporting their income and paying taxes, which in turn helped to increase the government's revenue.

2. Reduction in corruption: Demonetization was also expected to reduce corruption by making it more difficult for people to bribe or engage in other illicit activities using large amounts of untraceable cash. In the months following demonetization, there were reports of a decrease in corruption in various sectors of the economy, including real estate and public procurement.

3. Increased financial inclusion: Demonetization was also seen as a way to promote the use of digital payments and other formal financial channels. By withdrawing large denominations of cash from circulation, the government encouraged people to use digital payment methods such as debit cards, credit cards, and mobile payments, which can be traced and are therefore less susceptible to fraud. This led to an increase in financial inclusion, especially in rural areas where access to formal financial services was previously limited.

Negative impacts of demonetization in India:

1. Economic disruption: One of the major negative impacts of demonetization was the economic disruption it caused. The sudden withdrawal of a large amount of currency from circulation caused a shortage of cash, which disrupted the normal functioning of the economy. Small businesses, in particular, were affected as they rely heavily on cash transactions and were unable to access sufficient amounts of currency to meet their day-to-day needs.

2. Job losses: Demonetization also led to job losses in certain sectors of the economy, such as construction and small-scale manufacturing, as demand for goods and services declined.

3. Inconvenience for citizens: Demonetization was also inconvenient for citizens, especially those who were not familiar with digital payment methods. Many people had to spend long hours waiting in line to exchange their old currency for new notes, and there were reports of elderly and disabled people being turned away from banks because they were unable to stand in line for long periods of time.

In summary, demonetization in India had both positive and negative impacts on the economy and society. While it helped to increase tax compliance and promote financial inclusion, it also caused economic disruption and inconvenience for citizens.