Demonetization and its benefit.

On November 8, 2016, Our honorable Prime Minister Narendra Modi announced that Rs. 500 and 1000 will be demonetized after 12:00 A.M. He said that Rs 500 and 1000 are banned to curb the black money, to stop terror funding. Demonetization is a process of stripping a currency unit of its status as legal tender. There were processes announced to exchange the money. People were made stand in the long queue to exchange the money. People faced many problems in the process. Many people died within a few days. Later, Prime Minister said in a press conference that he only needed 50 days. After 50 days, all the black money would come to the national treasure, all the black money will be wiped out. It has been almost 4 years since he announced the demonetization.

Today, In this article I will describe to you about benefits and non-benefits to you. Here are the top 5 benefits of the demonetization. 

1. It reduces the liability of the government.
Before demonetization. Hard money circulated in the economy. There was lesser money circulate in the economy in the form of soft money. So, there was a liability for the government to maintain the hard currency in the economy. After the demonetization, Soft currency has been circulating in the economy. The government has also announced that 5 lakh crore rupees have been collected in the form of notes, hard currency, etc.

A picture depicting the difference between Hard Money and Soft Money.

Since demonetization occurred, Various online payment gateways have come for the money transaction like Paytm, BHIM, and various other types of payment gateways. Therefore, Soft Currency has been circulating in the economy. There was a research conducted by a university that if a country's economy is fully deal in soft currency than that company's GDP (Gross Domestic Product) will grow by 2% more.
Therefore, Demonetization has reduced the liability of the government very much. It is easier to maintain soft currency as compared with hard currency.

2. It reduces counterfeit currency notes. 

Counterfeit Money 

As mention in the upper point that after demonetization, illegal hard currency was wiped out from the economy. Soft Currency circulated in the economy. Illegal counterfeit or spurious notes (Hard cash) were wiped out of the economy. People are well versed

3. Curbing Anti-Social Activities 

Money confiscated from the hand of the Hawala Operator. 

Illegal anti-social activities occur when country money is circulated in the hand of anti-social people. Now We can say that demonetization had confiscated money from the hand of anti-social people like a terrorist, Hawala businessmen, etc.

4. It increases the GDP growth

A photo depicting the GDP 

As mention in the first point, if a country deals in the soft currency then its country GDP can grew  by 2% more. Demonetization has helped India to grew GDP by some percentage.

5. Increased Savings 

Harod-Domar Model

As a result of demonetization, people will tend to deposit their cash in the bank rather than at home. This will help them save more. Lower lending rates – With currency demonetization, money moves from people to banks and financial institutions. Thus, there is a better circulation of money.