Associate Professor, Krishna Institute of Engineering and Technology, Ghaziabad
Online published on 15 March, 2019.
The Government of India announced that the Rs 500 and Rs. 1000 denominated currency notes will cease to be legal tender. The move was targeted towards tackling black money, corruption and terrorism. After initial euphoria, questions began to emerge. What are the costs of this demonetization. Will it be effective if people can still create new black money thereafter. Will it increase the GDP? Will it increase inflation? What about tax revenues? In my research paper I look for answers these questions.
The outcome of the study says that the demonetization exercise is a game changer and the benefits of the same will be great for the economy in the long run. The study says the ban on high value currency note fundamentally address the underlying ‘cash engine’ that drive the shadow economy. It will enable further by encouraging cashless transactions and reducing crime rate. The Visa Report ‘Accelerate growth of Digital payments in India’, peg the cost of cash to 1.7 percent of Indian's GDP. This is one of the most significant steps that we have seen so far towards India becoming a cashless economy.
Further, the impact of such a move would vary depending on the extent to which the government decides to remonetise. This paper elucidates the impact of such a move on the availability of credit, spending, and level of activity and government finances.
Demonetization, Cashless Economy, Credit, Tax Evasion
