Thedemonetisation exercise is on the face of it, a financial affair. Generally, itis undertaken at the time of excessive money supply causing hyperinflation andinstability in the economy. But when we evaluate India it was not so. Thereason behind the demonetisation was black money and corruption. Some arguethat corruption is the lubricant an is often associated with economicprogress. Demonetisation is the mostimportant and necessary when there is a change of national currency.Demonetisation is the process where the government declares currently runningcurrency notes illegal to be tender after the declaration is made.
The reasonsof demonetisation are to control counterfeit notes that could be contributingto terrorism, and to eliminate the black money. A well-known study on blackmoney in India was done in 1985 by National Institute of Public Finance andPolicy under the guidance of Dr Shankar Acharya. To prepare a global estimateof black income their study confined itself to six areas.1. Incomesreceived either openly or covertly in the production of goods and services2. Blackincome received in relation to capital sale of asset3. Blackincome generated through in fixed capital formation in the public sector4.
Itis generated through private corporative secor5. Generatedthrough export6. Generatedthrough over invoicing of imports by the private sector and sale of importlicence. (demonetisation a means to an end? Ramagopal agarwala sagepublications India pvt ltd. Pg 15-16. 2017)Thedemonetisation had a great significant impact on the state of the Indianeconomy. Thus it would be able to introduce to the people the need of the useof digitalisation and transparency of the transactions.
According to SGurumurthy, demonetization is a corrective steps and he further adddemonetization as an investment. The reason to comment it as an investment,nearly 30 crore bank account were opened and brought huge savings into bankingsystem. Irresponsible monetary management has been stopped Tax base has risenby about 20 percent and advance tax for 2017-18 has increased 42 percent(Business line, 23/2017). Through the implementation of GST and other policiestoday it is not possible to bring black money to invest in land, gold or equityon the scale that used to happen in the past.