Q-What were the objective of demonetisation.? does it serve the stated purpose.?
Sol-Demonetisation is the process of scrapping legal tender in the country. Recently this process was attempted by scrapping 1000 Rs and 500 Rs notes from legal tender, which were in total 15.44 lakh crore Rs in circulation. Following were the objectives of demonetisation
1.Reducing Black money- As black money is what's not in the formal sector and by scrapping higher denomination currency in which most Black money are stored, attempt was to reduce that black money.
2.Terrorism and other anti-state activities like LWE(Left Wing Extremism) to be checked-As such activities are funded by illegal money and by scrapping currency they can't use that money nor can deposit in banks
3.Corruption Control-As most money earned through corruption are in black. Thus making higher denomination illegal, such money was aimed to become invalid.
Does it serve its purpose?
1.Black money-As 98.96% of circulating money comes to banks, thus stated objective that Black money would become a piece of papers doesn't succeeded, at least directly
2.Terrorism-As it was reported that militant activity in JnK and LWE region curbed after demonieisation. There it succeeded in this objective, though its effect on terrorism in long term is still debated.
3.Corruption Control-As most black money come back to banks, thus stored corruption money didn't become illegal. But its effect on future corruption is somewhat positive, as digital economy got a push and with digitalization of economy corruption gets reduced. Also as a psychological effect on corruption is also would help in its reduction
Demonetisation overall appears to be unsuccessful at least explicitly, but it surely helped in digitization of economy, general psychological effect wrt reforms in the country.
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