Benefits of Demonetization
Fraudulent practices are being reduced
The greatest advantage of demonetization is the reduction of fraudulent acts in the country. People with black money would fear being prosecuted for these crimes while hoarding cash for exchange with banks because they would be unable to exchange black money with banks during the process. As a result, it is an excellent way to combat terrorism or other criminal offences involving counterfeit currency.
Advanced Investment System
With demonetization, the banking system will significantly improve. If the economy moves toward a cashless society, it will pave the way for better access to credit in the long run. The remaining white cash will be handled by the government. Banks and financial institutions can thus use the newly legalized money to make loans to deserving borrowers and help the banks generate interest.
Reduced Liability
Allowing demonetization can reduce the risks associated with dealing with liquid cash. All issued notes are a liability for the government, and those who choose to turn in their income will see their current notes lose value. As a result, Demonetization makes it much easier for the government to manage the country’s economy.
Tax Evasion has Decreased
If carried out successfully, the sudden severe movement can significantly reduce tax evasion. Tax evasion can provide a significant boost to the Indian economy. Increased taxation allows the government to implement public welfare measures.
GDP Growth
Higher tax collection allows for lower interest rates on bank loans; thus, reducing tax avoidance can bring clean money into the currency stream and increase the country’s disposable income.
Features of Demonetization
Demonetization is the act of removing a currency unit’s legal tender status. It happens whenever the national currency changes. The current form or forms of money are removed from circulation and retired, frequently to be replaced by new notes or coins. A country’s old currency is sometimes completely replaced by a new currency.