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#Pros and cons of demonetizing Rs.500 and Rs.1000 notes?

Currently Rs 17,54,000 crore worth of notes are in circulation according to the RBI’s database on the Indian economy.
86% of currency by value in India are of Rs 500 & Rs 1,000 denominations.

Of this Rs 500 notes constituted almost 45% of the currency in circulation while 39% of the notes were of the Rs 1,000 denomination. In value terms.

However in terms of volume, Rs 10 and Rs 100 notes constituted 53% of the notes in circulation. This measure would mean that from midnight, almost Rs 6,32,600 crore in circulation in the form of Rs 1,000 notes would be illegal tender. To replace them, Rs 2,000 notes would be introduced, which according to the government would be limited in circulation.

RBI data shows that in 2015-16, almost 6.5 lakh counterfeit notes were detected in commercial banks of which almost 4 lakh were in the Rs 500 and Rs 1,000 category. It is in this context that the government wants to re-monetise the Rs 500 note while de-monetizing the Rs 1,000 note. But the number of Rs 100 counterfeit currency were also close to 2 lakh this year.


End of Hawala Transactions : Most Hawala transactions used to be carried out in the denominations of Rs. 500 and Rs. 1000 .With this ban , Modiji has delivered a fatal blow to the unethical Hawala traders as they can’t trade anymore using denominations of Rs. 500 and Rs. 1000 .

End of Huge Donations : Huge amounts of donation that is taken in the private education and healthcare sectors would be stopped . Schools, engineering and medical colleges and hospitals ( private ones) used to take huge amounts of money as donations especially in the form of hard cash in the denominations of Rs. 500 and Rs. 1000 . These money-minded people running these institutions won’t be able to make any easy money now . Same applies to the real estate sector.

Massive decline in black money: This decision is pain in the ass for black money holders having trucks of money undeclared and enjoying without paying any tax.

Almost End of Fake currency racket initially : If implemented correctly and effectively then it will result in end of fake currency racket as most of the fake notes are of Rs500 and Rs1000 but later criminals will make fake Rs2000 note.

Obstacle for terrorism:-As said by PM Modi “From across the border, our enemies running racket in India through fake currency”, We all know he was referring to Pak and China so this decision will put obstacle in their path.

Reduce in corruption for few months:-Shameless corrupt traitors will find other methods but it will take some time. Like in other countries bitcoins,online loopholes are used for corruption money but it will take sometime.

Fair Election:-we all know how much black money is used by political parties atleast for upcoming 5 state election it will be very tough task to use trucks of money in election like EC caught in Tamilnadu.

Increase in Amount in Savings Account –People will deposit money in bank accounts thus increasing the total amount in bank account. Increase in Online Transactions thus helping Fin- Tech Startups like Paytm, Freecharge etc.

Cashless Economy –This is still just hope since people will move to online/card transaction however it will take some time, there is no infrastructure at merchant level also rural population or even city people are not tech savy right now.


The rich don’t keep cash nowadays it’s all in the real estate and Gold.

Stock Market would crash: People without having a clear idea about the situation would try to save their fortunes and would start pulling out their money from the stocks that are going to be hit by this storm.

People with huge piles of paper currency are going to lose their calm : The day will start with Trade unions and other such unions coming together to protest and do marches.

Money’ll be sucked out of the market. – In coming weeks or months, there would be so much decline in trade and commerce.

Decline in the GDP – the GDP of India will decline heavily as confusion and tax obstacles in trade will hamper growth.

Inconvenience to people:– People will have to become slaves of banks and government officials. Long queues will be a common sight from now a days. See the long queues ? All middle class and poor people can be seen in queues.

Loss to common People :- Many people have fake currency that it unintentional or earned by hard work and they are using it without knowing it. Now banks will refuse to take fake money it direct loss for innocent people.

Rise in corruption:- imagine this, you have paas Rs. 1 lacs yoy go to exchange, cashier said “sab nakli hai be! line se hat baki bhi khade hai”,then you are screwed, whether it is fake or not.vWhile local politicians and powerful people will exchange their notes easily by paying bribes and CAs will facilitate them by finding all loopholes. CAs will be biggest beneficiaries as people have to employ their expensive services.

Only a Temporary Measure: This measure is only temporary . While this measure will reduce black money in the form of hard cash beyond Rs. 1.4 lakhs by rendering it useless , people will start making black money as soon as the newly printed notes come out in the market . There will be NO Nano Chip inserted in the Rs. 2000 currency . However , this step is extremely effective in controlling black money for a few months

Negative Effects

First phase of this will wipe out small businesses and traders which consists of 13 percent of Indian population, selling basic commodities. Who pay tax but not what they should- reason -government doesn’t do anything for them.  Business companies with bank limits against collateral will go down as the price of that particular property has already fallen like anything! How will they work ⁉

2nd phase will impact service industry. According to an estimate 63 % people will loose job, retail industry will dry out for at least 2 years. Unemployment will increase 500% . Exports for any reason will not increase as we dont have production capabilities, Inflation will be all time high. Real estate market will crash for at least 10 years. Labour coming from small villages working in construction will have no job’s.

People died as they didn’t get medical treatment. Auto drivers, taxi drivers will not be able to pay their loans and will loose their source of income. Luxury market will no longer exist. Malls will shut down, restaurants will shut down. So the people who get their salaries in Bank accounts please stop celebrating, because you are next. We pay enough in-direct tax to develop and sustain india. India doesn’t run on straight economy. We run on parallel economy. Reason being if we pay tax to actual value prices will increase, so will our income. Look at the level of income tax we pay, if every citizen of india pays 5000 rs one time as tax- it is enough for india to sustain for 9 years.

The Average Population per Bank Branch (APBB) as on 31.3.2013 stands at 12,100  Government has given us 50 days to deposit all our cash money into our bank accounts. Lets say 40 days are working out of 50. It means, on banks have to deal with average of 300 people daily. Yes, I agree that this number includes every living human being (children, senior citizens, women), so you can say that this number will reduce on practical scale. But wait, what about people who will come along? What about people who will come repeatedly, or I can say, daily? What about people who have to come again due to closing time or any other reason? This number will surely exceed. Believe me, public dealing is a very tough job and when you have 300 hassled brains in front of you, it becomes horrible.

Running out of Money: Though, everyone needs new currency notes, it is very hard to provide cash on time, even by RBI. Because, there is a limit on printing currency notes. Government just can’t order RBI to print new notes as per requirement. There is a regulatory system which guides RBI and Indian government how much new currency notes should be printed other country has to face some serious issues like, inflation. So, government will not be able to provide enough money to banks to pass on to consumers. It will create uncertainty.

Empty ATM’s: Same as bank branches, queues on ATM’s will also have to face same fate. Standing in long queues and returning with nothing will not please anyone.

Patients: Government hospitals have been allowed to accept old Rs 500 and Rs 1000 notes. According to National Family Health Survey-3, the private medical sector remains the primary source of health care for 70% of households in urban areas and 63% of households in rural areas. So its easy to understand that what will be the effects on these 63% and 70% patients.

White Into Black: As Indian, we do believe in cash. Even if our money is purely white, we go to bank, withdraw some money and go for shopping. Cheques and ATM swipes are not available everywhere. Like, if someone in family is hospitalized or, have marriage in house, we do withdraw our cash and feel comfortable. So, whatever the reason is, if someone has withdrawn a decent amount from his account then it will create a huge problem for him to prove himself innocent. So, in this case, instead of converting black money into white, a person has accidentally converted his white money into black.

Patience of People: Considering all of the above points (and many more in the line), it will need a superman effort from a common man to keep his patience in balance. Any outburst in the tolerance of people will make the situation more terrible. Though, for now, people are more in favor of respected PM because right now they are not suffers. But when they will face hurdles in their routine jobs due to shortage of money then it will be their patience.

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