Demonetization.docx - Demonetization A tool to curb black money corruption and terrorism Demonetization is defined as \u201c an act of stripping a currency

Demonetization.docx - Demonetization A tool to curb black...

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Demonetization: A tool to curb black money, corruption and terrorism Demonetization is defined as “ an act of stripping a currency unit of its statuses as legal tender” (Mali, 2016). Through demonetization circulation of obsolete currency is barred by introduction of new currency. Generally demonetization has been utilized as a tool to combat issues associated with inflation by reinforcing or re-establishing the value of a subject currency and, as a vehicle to assist progression of trade and access to markets. Further, in most of the scenarios demonetization is carried out to translate illegitimate economic proceedings into legal and more transparent activities and primarily to eliminate flow of black money ensuing from underground businesses which also includes terrorist financing activities. In addition, it is also used as a tool to combat corruption and promote cashless transactions through digitization drive. Despite its objective and purpose, demonetization impacts the economy of a country in a tremendous manner as the intervention directly affects the medium of exchange that is being employed in all kinds of economic transactions. Unsuccessful demonetization move can result in chronic societal turmoil and decline in economy. The history of demonetization dates back to 1990s and to underpin the failing economy numerous countries have implemented the demonetization move. While some nations have enjoyed the success of the demonetization move, few countries were overshadowed by the chaos resulting from demonetization drive. To ensure uniformity in currency, in 1971, Britain introduced coins of 5 and 10 pounds and this act of demonetization had only a minute impact on the economy as the government gave adequate time to the people to exchange their money. Similarly, during 1996, with the objective to check black money and widespread counterfeiting, paper-based notes were replaced with polymer bank notes of the same denomination in Australia. The move didn’t have any adverse effects but helped in turning Australia into a business-centric country. In contrast, demonetization of 50 cedi has resulted in nationwide chaotic situations and in 2010, North Korea implemented demonetization and it ultimately led to immense economy downturn with the people left deprived of basic needs (K, 2018). Black money refers to any income generated from illegal or underground business and it would also encompass the legitimate income which are hidden from the eyes of public authorities basically to evade taxation (Solaiman, 2014). According to Swiss Bank statistics
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of 2011, it was brought to the notice that a tremendous amount of black money is deposited with them wherein India tops the list with approximately $1500 billion followed by Russia with $470 billion (Ramdurg and Basavaraj, 2016).
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