New Delhi: On this day five years ago, i.e. on 8th November 2016, Prime Minister Narendra Modi announced demontisation which pushed Rs 500 and Rs 1000 denomination notes out of circulation.
Zee News Editor-in-Chief Sudhir Chaudhary on Monday (November 8) discussed how demonetisation benefitted the Indian economy.
The purpose of the move was to reduce black money and corruption. The 500 and 1000 denomination notes that were withdrawn by demonetisation were valued to be at Rs 15 lakh crore. At that time, it formed 86 percent of the total currency in circulation in India.
The bigger the note is in circulation, the easier it is to do corruption and spread terrorism. For example, if someone has 1 crore rupees in cash and all the notes are 50-50 rupees then they will have to hold two lakh notes with him, which is not easy to hide. If the cash is in the form of hundred rupees notes then the number of notes will be one lakh. But if all the notes are of two thousand rupees then keeping only 5 thousand notes will work. The bigger the note is, the easier it becomes to keep it hidden as cash.
Bigger notes allow people to evade taxes, commit financial crimes and are used for drug smuggling, to fund terrorists, and above all, it makes it easier to hoard black money.
Smaller notes become important for day-to-day needs. There is more transparency in transactions. Smaller transactions can be done easily and the economy of rural areas is mostly dependent on small notes.
As of 29th October, Rs 29 lakh crore was in circulation in India in the form of cash. But if there was no demonetisation, then this amount would have crossed 32 lakh crore rupees.
One of the major benefits of demonetisation was that now people in India are paying tax more than before. And the conviction rate in tax evasion cases has increased six-fold.
After demonetisation, the circulation of counterfeit notes in the market has decreased significantly. In 2016, 7.5 lakh counterfeit notes were seized, while in 2020 only 2 lakh counterfeit notes were caught.
Demonetisation also helped boost Digital India. The country now has a very strong infrastructure for digital transactions. This year, in the month of October alone, UPI payments worth more than Rs 7.5 lakh crore were made.