The Effect of Demonetization on the various Sectors
In an emboldened move, government declared that the 500 and 1000 Rupee notes will no longer be legal tender from midnight, 8th November 2016. The RBI will issue new Rs. 500 and Rs. 2,000 notes which will be placed in circulation from 10th November 2016. Notes of 100, 50, 20, 10, 5, 2 and 1 Rupee will remain legal tender and will remain unfazed by this decision. This measure has been taken by the prime minister if India in an attempt to address the resolve against corruption, black money, terrorism and counterfeit notes. This move is expected to cleanse the formal economic system and discard black money at the same time. One of the reasons that prompted the Government to demonetize Rs. 500 and Rs. 1000 notes is that their circulation was not in line with the Economic Growth. As per the Finance Ministry, during 2011 2016 periods, the circulation of all notes grew 40 but the circulation of Rs. 500 and Rs. 1000 notes went up by 76 and 109 respectively. Relatively speaking, the economy has grown only by 30 which is way below the money circulation.
Dr.K.Suryanaryana | Dr.T.Sreekrishna