Demonetization Advantages and Disadvantages

Demonetization refers to discontinuing of current currency units and replacing those currency units with new currency units. It is a major decision and it impacts all the citizens of the country because overnight all the money you have become a piece of paper which has no value if you do not exchange it with new currency units or deposit it in the banks. In order to understand demonetization better let’s look at advantages and disadvantages of demonetization –

Advantages of Demonetization

  1. The biggest advantage of demonetization is that it helps the government to track people who are having large sums of unaccounted cash or cash on which no income tax has been paid because many people who earn black money keep that money as cash in their houses or in some secret place which is very difficult to find and when demonetization happens all that cash is of no value and such people have two options one is to deposit the money in bank accounts and pay taxes on such amount and second option is to let the value of that cash reduced to zero.
  2. Since black money is used for illegal activities like terrorism funding, gambling, money laundering and also inflating the price of major assets classes like real estate, gold and due to demonetization all such activities will get reduced for some time and also it will take years for people to generate that amount of black money again and hence in a way it helps in putting an end this circle of people doing illegal activities to earn black money and using that black money to do more illegal activities.
  3. Another benefit is that due to people disclosing their income by depositing money in their bank accounts government gets a good amount of tax revenue which can be used by the government towards the betterment of society by providing good infrastructure, hospitals, educational institutions, roads and many facilities for poor and needy sections of society.

Disadvantages of Demonetization

  1. The biggest disadvantage of demonetization is that once people in the country gets to know about it than initially for few days there is chaos and frenzy among public as everybody wants to get rid of demonetized notes which in turn sometimes can lead to law and order problem and chaotic situation especially in banks and ATMs which are the only medium to change the old currency units to new currency units.
  2. Another disadvantage is that destruction of old currency units and printing of new currency new units involve costs which has to be borne by the government and if the costs are higher than benefits then there is no use of demonetization.
  3. Another problem is that majority of times this move is targeted towards black money but if people have not kept cash as their black money and rotated or used that money in other asset classes like real estate, gold and so on then there is no guarantee that demonetization will help in catching corrupt people.

As one can see from the above that demonetization has both advantages and disadvantages and it is up to the government to see and analyze all the pros and cons and then decide whether it is beneficial to go ahead with demonetization or not.

66 comments… add one
  • Deekshika

    I think this step is just awesome!!!
    Modi ji is the best… At least he is doing something or the else…

  • Diksha jain

    A very very good step to remove black money from India

    • Ayush

      A good step to take out black money

  • vikas

    Nice well done


    Mr. Modi is not an economist. The major economists of India either resident or NRI kept mum on this step and the people on tea-stall or a student of geography etc. carried on commenting.Those who are in favour of the decision should produce the comparative factual data of cost of replacement of money and benefits of this step,if no then there is no matter either one agrees or not. Please keep in mind that Modi is a human being not a deity.

  • Deepali Bhardwaj

    Yes I think modi Ji had taken a good step in the beginning some have to face a little problemsomething but at last everything will all right…
    At first I have also negative points towards narender modi but now I am totally satisfied. ….

  • Snigdha bhanja

    Whosoever thinks that Modi ji has took a wrong step towards demonetization is a fool because though there was some problem while exchanging the notes but government found a good amount of black money and it is going to be used for our convenient only .

  • Subrat kumar paikaray

    Though demonetisation help in progressment of our country,its also a duty of every citizen to pay their tax revenue at right time

  • nitish

    We shall see a great impact of this move of the Central Govt on Indian Society and Economy. The first impact shall be that people will have lower expenditure power. With that they will not be able to purchase luxurious things.

  • Yuvi

    It’s help me to do my homework and i can say good job Mr Modi

  • suresh

    he has taken good step.but nation want to know the result is favorable or unfavorable in terms of money.

  • Ritik Rawat

    Yes, I m agree with PM Modi ji’s step now so many back money came out but still some money is their only so we have also think on it

  • Pritishna

    I think that there is more disadvantages than advantages.

  • Nandini

    It was surely a smart step but it doesn’t has long term effects as even if we were able to collect a lot of blaxk money but this won’t stop people from being engaged in illegal activities again.

  • P. S. Edway

    Demonetisation is a brave and good step its advantages can be seen in long term means not one year

  • kamal singh mehra

    Very good this is best step to catch corrupt

Leave a Comment

Related pages

horizontal merger examplesppt on merchant bankingdefine certificate of depositsconsignee meaning in englishadvantages of discounted cash flowdifference between overdraft and cash creditabsolute advantage trade theoryadvantages and disadvantages of zero based budgetinglocational arbitragemeaning of consigneradvantages of a takeoverdifference between fund flow and cash flow statementinelastic examplesplr sbibank loan and bank overdraftformula of profitability ratiocalculation of net worth formuladifference between current ratio and quick ratiowhat is convention of materialitycash flow statement wikipediaadvantages of television advertisementcharacteristics of socialist economyadvantages of marketing segmentationcongeneric mergerswhat is barter system with examplecalculation of net worth of companymerit of capitalismtransfer pricing advantages disadvantagesdistinguish between management accounting and cost accountingformula for rocelet's learn punjabicompanies that are monopolistic competitionwhat is difference between account payable and bills payableautocratic leadership stylesdiminishing balance method of depreciationfictitious assetdebit cards advantages and disadvantagesdefinition of centrally planned economycrossing of a chequedisadvantages of cash managementwhat are substitutes and complements in economicscharacteristics of a autocratic leaderinventory turnover ratio interpretationhow to prepare fund flow statement with examplepayback period advantagespayback period advantagescontingent liability exampleabsolute advantage theory of international trade by adam smithmerit and demerit of deregulationadvantages and disadvantages of mixed economieslifo disadvantagespros and cons of autocratic leadershipdirect and indirect quotationsthe difference between normal and inferior goods is thatmateriality principlecorruption advantages and disadvantagescost oriented pricingoutwards definitionaccounting concept meaningbank withdrawal slipskimming costdisadvantages of decentralizationhow does the barter system workdisadvantages democracyfeatures of demat accounthindi meaning of compensateglobalization merits and demeritsdisadvantages of functional organizational structuredisadvantage of mixed economyan example of complementary goods would bedictatorship leadership styleinternational trade advantages and disadvantagesexample of market skimmingunitary elasticity of demand exampledifference between cash credit and overdraftwhat is duality in accounting