Demonetization In India 2016

Demonetization Move In India 2016

It was on November 8, 2016, evening, the Prime Minister of India, Mr. Narendra Modi, announced that on the stroke of midnight all 500 and 1,000 rupees currency notes would be discontinued as legal tenders. The life of the Indian people was no longer the same after this sudden announcement by the Indian Prime Minister. The demonetization move in India 2016 had lead to a series of events and peaceful economic revolution within the country.

Mr. Narendra Modi cited several reasons for the demonetization of Rs. 500 and 1,000 banknotes. Through this move, he designed to:
# dismantle the fake currency racket within the country,
# cleanse the country of black money,
# stop terrorism funding,
# check corruption,
# bring more people of the country onto the proper, taxable economic grid,
# and to further digitize the Indian economy which was mainly cash-centric.

To make the demonetization move in India 2016 a full-proof plan, the Reserve Bank of India (RBI) decided to keep all the banks and ATMs throughout the country closed on November 9, 2016. They were supposed to reopen on November 10.

The RBI also announced that a new redesigned series of 500 rupee banknote and a new denomination of 2000 rupee banknote will be introduced in the Indian economy from November 10, 2016. Further, the RBI gave 50 days to the people to redeem their old demonetized banknotes, after which they would become worthless printed paper. December 30, 2016, was set as the deadline for the redemption of the demonetized currencies.

The RBI prescribed a set of protocols to follow in order to exchange the demonetized notes for the old 100 rupee note, which was still valid or for the newly issued banknotes. People could deposit their demonetized 500 and 1,000 rupee banknotes in the post office or bank accounts from November 10 to December 30, 2016 without any limit. They will be able to withdraw cash from banks, which were limited to Rs. 10,000 per day and Rs. 20,000 per week.

People were allowed to exchange their old 500 or 1000 rupee notes at any head or sub post office or at any bank till November 24, against a valid ID proof, which included Voter ID card, Aadhaar card, PAN, etc. The limit for such exchange was Rs. 4000/- per day. Cash withdrawal limit from ATMs was Rs. 2000/- per day per card. Later, this withdrawal limit was increased to Rs. 4000/- per day per card.

After the announcement, people rushed to the ATMs to withdraw cash in Rs 100 notes to meet their expenses and other financial needs on November 10 and in the days to come. When the banks and the ATMs finally reopened on November 10, 2016, there were long queues of people in front of them. People had to stand in line from morning till late evening to withdraw new banknotes or exchange their old notes. There were reports that some people died while standing in long queues outside the banks.

The 500 and 1000 rupee banknotes amounted to almost 86% of the currency in circulation in the country. Moreover, more than 95% of all transactions in the country were done in cash and around 85% of workers were primarily paid in cash. Further, almost half of India's population never had bank accounts.

The Indian economy almost came to a halt during the demonetization move in India 2016. Farmers couldn't buy seeds, trade and business activities stopped, auto-rickshaws and taxi drivers didn't have any means to receive payments, fishermen, vegetable and fruit vendors were unable to sell their produce in the market, employers couldn't pay their staff and so on. Even the hospitals and other healthcare services refused patients who had old demonetized banknotes. Some families had difficulty in procuring their daily stores. Weddings and many other social gatherings throughout the country were either postponed or cancelled. However, to provide the people with a little respite, the RBI later allowed people to withdraw Rs 2.5 lakh for marriage purposes against valid proof.

As they say, necessity is the mother of all inventions; so many people devised ways to survive the cash crunch in the country. People started to use their debit and credit cards more frequently. Many people resorted to online or net banking systems to transfer funds or make payments to other people. The use of e-wallet and other digital payment systems also increased manifold in the country. Even small vendors, like laundry washers, vegetable and fruit hawkers, taxi drivers, etc. who were perceived as the backbone of India's cash economy, started to offer electronic payment option to their customers.

Even though there were allegations that the Prime Minister did not take into account the subsistence-level agricultural population and the lifestyle of India's massive lower and middle-class working force, the majority of the common people seemed to have welcomed this demonetization move. Approximately 93% of the respondents in the Modi App voted in favour of the demonetization move in India 2016.

The common people braved the situation and tackled their difficulties peacefully and continued to show their solidarity with the Prime Minister Narendra Modi in every possible way, perhaps, in the hope of a cleaner economic environment!!!

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