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:

1. Unearth stashed cash
2. Collect taxes from this cash
3. 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.

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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.

Do you know Rs. 10 currency note made up of plastic would be printed in India. Check out more on this.

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.

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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.

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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.

Read more information on demonetization here.

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.

“So basically anyone with black money will be in trouble and that’s the objective of Indian government to let tax evaders pay taxes or make them trash the illegally kept money.”

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