“The lack of money, the root of all evil”- Mark Twain
Introduction to demonetization
́Demonetization was the root of evil for India for a period. It was more like an unleashed wind which destroyed many families in India and within overnight, they were pulled down to roads. The government of India declared on 8th of November 2016 that notes of 1000 and 500 rupees are invalid. Demonetization effected the economy in the short term. India. MSME sector got affected the most. Based on a survey made in Surat alone, 89000 power looms were sold as scrap and it led to a loss of 31,000 jobs. There was a countless example from big markets to industrial clusters that were affected by demonetization.
Not only it affected the industrialists it also affected the common people. Demonetization was announced in the evening around 7 pm, when most of the people were working in office particularly in IT sectors and many of them were not allowed to take any gadgets inside the room where they were working, I being one of them had no idea about it and when the office gets over we all came to know that the notes had been banned. That news was good enough to put any common man in trouble who do not stay in their own home and had to buy food every day. ATM by that time was already filled with 100 people and many times after standing for an hour or two we used to listen that ATM is done with the money. Unfortunately, many in spite of having money in the bank had starved for 1-2 days because of lack of money.
The biggest disadvantage of demonetization was, it raised a frenzy and chaotic environment everywhere. The public wants to get rid of demonetized notes which sometimes had let to law and order problem. Many Indian housewives store money secretly so that they could be of help during times of financial crisis. Due to demonetization, the accumulated wealth is of no use until and unless they are exchanged in banks.
As cash is the most preferred medium of transaction and fewer people use the banking system in India. Their immediate anger shifted to mismanaged banks and unprepared banking system.
The banks couldn›t provide enough newly designed banknotes to substitute the canceled notes. The people have taken in conserving whatever cash they have in their hand. Trade across all aspects of the economy has interrupted and sectors like agriculture, fishing, and huge informal sectors were almost shut down almost in initial days of the announcement. Unbanked and informal sector was the worst hit. Even there was a much lower GDP growth compared to previous years. There was a growing demand for which there was not enough supply. Indians preferably goes to normal shops who do not have an ATM use machine also the poor people had no idea about what ATM is all about. Taking this golden opportunity China came into play. They were reaching Indian customers with better price and better and innovative goods. Chinese were importing at the cost of Indian jobs.
Though demonetization was done to get off the black money in the Indian market and with a good motive it had adverse effects on Indian economy and Indians. It was moved by the government for long-term benefits for its people overlooking the short term mismanagement by the banks. It was also an added cost and a big challenge for the government of India to produce 500 and 2000 rupees’ new note within a short time.
Demonetization was a great move weakened by bad execution.
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