� Demonetizations is an act of stripping a currency

unit of its status as legal tender.

OR

Demonetizations is a monetary step in which a

currency unit’s status as a legal tender is

declared invalid.

National currency vs. Bitcoins

� It involves either introducing new notes or

coins of the same currency or completely

replacing the old currency with new currency.

� 1946 – RBI demonitized 1000 and 10000 currency

notes.

� 1954 – 1000, 5000 and 10000 notes issued by govt.

� 1978 - The govt. of India demonetized Rs.1,000, 5000

and 10000 notes (Jan 16 – Morarji Desai Govt.)

� Some economists feel the govt. is doing

remonetisation as it is putting money back into the

economy.

� Only the existing notes of 1000 and 500 were demonetized on 8th November, 2016. Such notes accounted for 86% of the value of cash circulating in the country and ceased to be legal tender with immediate effect. Notes and coins of other denominations continued to be valid.

� The government introduced new notes of 2000 and 500 with additional security features. These notes have different specifications including size and thickness.

� The circulation of demonetized notes was made illegal and they could be deposited with the banks or exchanged for new notes upto a certain limit laid down by the government.

� To mitigate the difficulties faced by the people, fuel pumps, government hospitals, railways and airline booking counters, municipalities, state government recognized dairies and ration stores and crematoriums were allowed to accept the banned 1,000 and 500 notes.

� The government offered incentives to the use of digital payment methods like debit and credit cards, AEPS (Aadhar Enabled Payment System) UPI (Unified Payments Interface), Mobile wallets such as Paytm, Freecharge, Mobikwik, Oxigen, mRupee, Airtel Money, SBI Buddy, etc., POS (Point of Sale) and Internet Banking.

� It was reported in August 2017 that about 99% of the banned currency had been deposited with the banks.

� To curb terrorism

� To stop the circulation of black money and catch the tax evaders

� To put an end to fake currency / counterfeit currency in circulation

� To end corruption

� To establish a cashless economy

� Combating inflation

� To make India a digital economy by promoting digital modes of

payment

� To encourage tax compliance by the individuals. There was a substantial

increase in the no. of individuals filing income tax return after

demonetization.

� Keep a track on unaccounted cash

� Stop illegal activities like fake note circulation, illegal funding all at

once. Any transaction above Rs. 3 lacs will be done in digital form

only

� Increase tax revenues so that the govt. spending in different sectors

increases

� Increase in the no. of digital transactions – more transparency

� All fake notes were thrown out of circulation

� Cheaper loans as banks had access to huge amounts of cash that

was deposited

� Created chaos

� Expected results not achieved

� Middle class and poor get affected badly

� Won’t stop black money generation

� No solid proof that corruption has come down

� Real estate which contributes to 11% of the GDP falls

� Rural population depends on cash

� No abatement in terrorism – short lived

� Recession

� Black money is sent abroad

� Black money in the form of assets � Corruption is still prevalent

� Counterfeit currency is still circulating

although lesser in proportion to what we had

before demonetization.

� After the demonetization of currency notes

of 500 and 1,000 by the Central Government on November 8, 2016, an industrialist

approached a bank manager to exchange 2

crore in banned currency notes for new

currency notes of 2,000 and offered him a

bribe of 15% of the value exchanged. Identify the dimension of environment cited in the

above case and give a reason for that.

� After the announcement of demonetization of Rs.500 and Rs.1,000 currency notes, the Union Government initiated steps to promote economic transactions by encouraging the use of e-wallets, plastic money (through debit, credit, gift cards etc.), Unified Payment interface (UPI – to transfer from one bank to another), Aadhar enabled electronic data capture (EDC) machines or net-banking by waiving processing charges, fees and allowing discounts in payments. Which components of business environment are associated in the above situation?

� Legal environment - It is because of the fact

that the old currency notes of 500 and 1,000 were legally banned from

circulation. They were rendered worthless

because of operation of law.

� Economic (Cashless economy), Political

(initiative by Union Government) and technological (digital payment mechanism)

environments