Historical reform in India which was announced on 08th Nov,
2016 of banning the Rs. 500 & 1000 note is being welcomed across the
country. The revolutionary move was appreciated even by the World Bank and many
leaders across the world and Indian corporate big wigs.
Although Indians are currently facing difficulty in
exchanging the banned Rs. 500 & 1000 notes or withdrawing/depositing cash
from the ATM/bank; the problems won’t last long. Banks and RBI are taking every
possible measure to help people by exchanging demonetized currencies. They are
also making cash available in sufficient quantity in the ATMs; so that people
do not face problems in buying day to day utility things such as grocery,
vegetables etc.
But do you know that this move is going to boost Indian economy
in the long run? Let’s understand:
This demonetization decision has three main objectives:
Unearth stashed cash
Collect taxes from this cash
Stop black money flow
Black money meaning: It means money which has not been
declared while paying income tax or in simple layman language – tax is not paid
for the money earned/kept hidden.
In this article – we’ll talk about the positive effects of
currency ban on Indian economy. After all the decision was taken to curb black
money which is paralyzing the growth of economy.
More tax collection: Since government has increased the tax
from these evaders, they will have to pay larger sum. More money collected with
the government will in turn benefit Indian economy i.e. GDP will increase.
Nation Building: Collection of higher taxes will eventually
benefit Indian economy as large amount of money will flow into the system which
would be used for the nation’s development such as infrastructure, roads,
transportation, and many others. And this means more GDP growth. More the
development projects in the country straight away means requirement of
manpower. And this will give jobs to many people. Most importantly the money
can be used for the welfare of the farmers.
Banking Boost: More people will now open bank account, which
would increase deposits in the banks. Since more people will use banking for
money transactions, dependency on cash transactions will reduce and
transparency will increase.
Increase in digital payments: Apart from bank account, more
people will start using debit or credit card or digital wallet. Ultimately this
will benefit government’s digital India initiative. Basically this move will
bring higher level of transparency in transactions. Currently major chunk of
transactions in India happen through cash. Digital wallet companies will
naturally get investment boost due to increase in using their services.
Lowered interest rate & inflation: Loan interest rate
will fall as banks will have more money to invest due to increase in deposits.
This will lead to increased investments by foreign companies will lead to price
control of essential commodity and thereby inflation will reduce.
Employment will increase: More demand for houses and
increase in nation developmental projects means more demand for labors and
other skilled manpower. And this will give boost to the employment and
unemployment will eventually reduce. Employment increase will give jobs to poor
especially those who are unskilled. It will eventually meet the objective of
Sabke Saath Sabka Vikas.
Increase in gold investment: Demand for gold will increase
as more and more people will start investing in gold as an alternative to cash
deposit in the bank. It will give rise to deposits through gold monetization
scheme. So India will rely less on gold import as gold deposited through the
scheme will be used to meet India’s gold demand. This will help in
strengthening of Indian economy because importing gold is very expensive. And
India being one of the top most consumer of gold, it will certainly benefit the
country.
Drop in real estate prices: It will fall as black money
which was given in cash earlier will now become difficult to arrange due to
scrapping of high denomination notes. And also fear from this strict decision
will stop agents to demand money in cash. This way buying house will be less
expensive as its demand will increase.
Get key updates on currency note ban.
Corruption or bribery will go down: Cash or physical gifts
was the way to bribe an individual or business. After such a bold decision,
many will fear taking bribes. India’s ranking in corruption index will improve.
We’re currently rated very high in corruption index.
Ease of doing business: Corruption has always kept foreign
investors to stay away from investing in India. But with this decision, India’s
ranking on global scale in terms of investments and ease of doing business will
improve as corruption will drastically reduce.
Control on terrorism, smuggling etc: All such activities
will take a hit as they completely rely on cash funding which is done by
counterfeiting the notes especially Rs. 500 & 1000. This is highly required
in the nation’s interest as it kills economy.
Worthless paper: Even if someone wishes to burn or torn
black money, it will ultimately benefit India by the same amount. Because that
money can’t be used for any unethical purpose such as bribing, buying expensive
items. Or even if someone still wishes to keep these old currency notes – it
will be a piece of worthless paper.
Disadvantages or problems will be in terms of arranging cash
for some weeks post the ban. Although standing in queue for few minutes or
hours outside bank or ATM is little painful but still in the long term it will
benefit India as mentioned above. People are facing problems in buying day to
day necessary things such as grocery or other necessity items. Poor people
especially daily wage workers will suffer initially as they don’t have easy
access to banking nor they have bank account. But RBI & banks are working
at phenomenal speed and are taking untiring efforts to ease people’s pain and
make them notes available as early as possible.
=====================Thank you========================================
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