Demonetization

Demonetisation is the replacement of existing currency with a new one, causing the old currency to lose value. 

It may occur for reasons like currency change, phasing out old payment methods, etc. and has been adopted by various nations. 

Reasons for Demonetizing 

• Demonetisation is implemented worldwide for various reasons even though it's uncommon.

• It can occur due to hyperinflation causing currency value loss.

• It can be used to stop illegal activities like tax evasion, terrorism, and counterfeiting.

• It can also promote the transition towards a cashless economy.

Benefits of Demonetization  

Demonetisation can increase monetary standards and prevent crime. 

1. Reduces crime 

It can decrease various criminal activities by nullifying the value of old currency. 

2. Reduces tax evasion 

It can also prevent tax evasion, as it forces people to deposit old currency in banks, helping to identify tax evaders. 

3. Promotes a cashless society 

It can fast-track the shift towards a cashless economy by reducing the use of physical money. 

Drawbacks of demonetisation 

Demonetisation may also have negative effects: 

1. Costs of producing new currency. 

2. May not completely halt criminal activities 

3. Can cause public unrest 

If not implemented well, it can cause public unrest as people scramble to exchange currency. 

4. Economic slowdown 

It can lead to a temporary economic slowdown as people may hesitate to spend, reducing demand for goods and services.