Demonetisation is the ‘demon’ everybody in India is talking about nowadays – regardless of which part of the country you are in, or what social strata you are interacting with! This step by the Government has certainly created upheaval in the country; but when a major economic reform like this is happening, some aches and pains are to be expected. In the long run, it is expected to deliver manifold benefits.
Let us first examine what is meant by demonetisation.
It refers to the act of declaring a unit of currency to no longer be legal tender. Whenever a change in national currency is being enacted, old currency units have to be retired.
Why do nations demonetize currency?
There are several reasons, the main ones being:
- Combating inflation
- Checking corruption
- To move to a cashless system
- To stem funding for criminal and terrorist activities
- Eliminate counterfeit notes
- Apprehend tax evaders
On November 8th 2016, the Government of India announced that 500 and 1000 rupee notes would be demonetised effective midnight, or from 00:01 hours on 9th of November. These notes accounted for nearly 86% of the total cash supply in India. The goal: get rid of black money, fight tax evasion, stem flow of funds for terrorist activities, and promote a cashless economy. Overnight, individuals who had illegally hoarded huge amounts of money were forced to deposit the money in banks and pay tax and fine, or risk losing it altogether.
India was not the first country to demonetize currency. In 2015, the government of Zimbabwe announced demonetisation to combat the hyperinflation, recorded at a mind-blowing 231,000,000%! When the Euro was made the official currency of the European Union in 2002, the currencies of EU nations, like the German marc, French franc, and Italian lira and so on, were demonetised.
Now let’s examine the different benefits of a cashless system for citizens:
- It’s easy and convenient: You can make payments online either through internet banking, or using online wallets like SBI buddy, paytm, Mobikwik, Pay U Money and so on. It is especially useful in emergencies – you can make the transaction at any time; all you need is the app. You don’t need to be physically present to make a payment.
- Save on fuel, rail tickets, highway tolls and insurance premiums if you make digital payments.
- Control your Spending: When nearly all your transactions are recorded, it’s easy for you to keep track of how much you’re spending. You can easily show from where your income has come and how you have spent it.
- Reduced risk: If you lose your currency notes, they are gone for good; but if you lose your cards, you can easily block it by making a phone call. Even your mobile wallet can be remotely blocked if you suspect a security breach/hack.
- No cash, no lending: When there’s no cash, you can easily send back people who come to borrow money! It may seem like a small advantage, but believe me, it helps. You also don’t have to worry about getting back change when you shop.
Demonetization and digital economy are very vast topics and I have just touched the tip of the iceberg here. To get to the heart of the matter and to know exactly what demonetization means to you, and how you can benefit from a digital economy, register for our event on the 14th of January at the Raviz Kadavu Resort, Bypass,Calicut. Hurry – there are just a few seats left and they are filling up fast! Don’t miss out on a golden opportunity! Register at www.exposebusinessevents.com