On November eighth, 2016, Government of India introduced its choice to demonetize or ban old foreign money notes of INR 500 and INR 1,000 in move. This pass was taken to lessen “black money and counterfeit notes used by terrorist companies for illegitimate activities” inside the economy. These currency notes account for 86% of all the foreign money in movement.
The move to demonetize High Denomination Currency notes has hugely impacted lives of virtually every Indian in keeping with the market information. This has also hampered the economic activities around the usa. A recent document from Deutsche Bank estimates that Indian actual GDP increase is in all likelihood to slow down to 6.5% in the contemporary fiscal yr because of demonetization. Major implications of this demonetization are stated below:
India is predominantly a “coins-primarily based” financial system, with 98% of all client transactions performed in coins, in phrases of volume, and over eighty five% of employees receiving their wages in coins. This move is also expected to propagate the perception of “Digital India” project undertaken by using authorities to make transition smoother from a cash-based totally economy to a “coins-much less” economic system.
Increasing Tax Revenue
In addition, India is essentially a very negative country in worldwide standards with annual according to capita GDP of underneath US$1,six hundred in 2015, as records from World Bank suggests. By forcing human beings with illegal coins holdings to deposit such cash holdings into financial institution money owed and pay taxes is meant to increase tax revenue to the government. These tax sales can then be utilized to finance higher public infrastructure as well as different social welfare programs for the poorest sections of the society.