What is Demonetization:
When the government legally closes the old currency and declares to bring a new currency, it is called demonetization. After this there is no cost of old currency or notes. However, the government is given time to replace old notes with banks, so that they can change their old notes which have been deferred.
On November 8, 2016, Prime Minister Narendra Modi announced the declaration of notes of 1000 rupees and 500 rupees in the country, which means declaration of monetization. RBI governor Urjit Patel also supported the government’s announcement. After that the government brought new notes of Rs 500 and Rs 2,000 in the market.
According to RBI, there were notes worth Rs 16.42 lakh crore in the market till March 31, 2016, of which about 14.18 lakh rupees were in the form of 500 and 1000 notes. The Reserve Bank of India formed in 1938 has not yet issued a note of more than Rs. 10,000.
Governments decide for monetization to curb black money, corruption, fake notes and terrorist activities. People engaged in illegal activities keep notes with them. In such a way, monopolization is directly hurt on them. Sometimes cash ban is also done to discourage cash transactions. The Modi government of the Center also expects that ban on black money, fake notes and terrorism will be curb. However, due to the ban, the common man faced many difficulties too. The Central Government is trying to discourage cash transactions from this decision. In many countries, monetization is considered to be a very common process.
On the contrary, no work has been done to repair the economy in Venezuela. That’s why a liter of milk is sold in around 13 thousand rupees and one egg is sold for 900 rupees. The most surprising thing is that we are not weighing in Venezuela for counting the notes instead of luggage. This means that instead of a slice of butter, much weight is being taken for notes.
When India Was the First to Take Note of:
For the first time in India in 1946, it was decided to close the notes of 500, 1000 and 10 thousand rupees. In the 1970s, the Wanchoo Committee related to direct tax investigation had suggested monetization, but the suggestion became public, due to which the ban was not made.
In January 1978, the Janata Party government of Morarji Desai closed the notes of 1000, 5000 and 10 thousand by forming a law. However, the then RBI governor IG Patel had opposed this ban.
Many times the government slowly closes the old notes rather than closing down. In 2005, Manmohan Singh’s Congress-led government had monetized 500 500 notes before 2005.