WINSPIRE EMPOWERING YOUTH Issue 3 Volume 3 | Page 7

What can be achieved postdemonetization ?
History of demonetization

What can be achieved postdemonetization ?

Unproductive cash brought to use : The cash stashed at home is unproductive cash . Such a move will bring all the currency in circulation through the banking system .
More employment opportunities : A large number of people graduate every year but many don ’ t find good jobs for themselves . Availability of cheap credit will give a boost to trade and new industries . This will thus increase employment opportunities in the country not only for young graduates looking for jobs but also for the farmers in the agriculture sector who want to shift to the service sector but are unable to , due to lack of opportunities .
Inflation checked due to reduced tax rates : Increase in tax base will lead to reduction in tax rates . Thus , the prices of most commodities will come down . For example : The price of petrol is Rs 27 per litre actually which has

History of demonetization

• The sudden move to demonetize `500 and `1,000 currency notes is not new . `1,000 and higher denomination notes were first demonetized in January 1946 and again in 1978 .
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been inflated to Rs 66 per litre by adding taxes . Thus , if all the citizens pay taxes sincerely and if all the black money is checked , the tax rates will definitely come down , in turn , reducing the prices .
Better social security schemes : Since the entire system is now made transparent and tax evasion is checked , the government revenue will increase . Thus , the government will now spend more on education , health , infrastructure etc . More and more subsidies will also be made available in sectors which require it the most .
Cheap credit : Till now , banks in our country encouraged the inflow of money into the banking system by providing high interest rates on deposits . Since banks attracted deposits at very high rates , they provided credit at even higher rates . Due to demonetization , banks will now be able to attract deposits at 0 % and hence provide credit at 2-3 % which is the globally competitive interest rate .
• The highest denomination note ever printed by the Reserve Bank of India was the `10,000 note in 1938 and again in 1954 . But these notes were demonetized in January 1946 and again in January 1978 .
• `1,000 and `10,000 bank notes were in circulation prior to January 1946 . Higher denomination banknotes of `1,000 , `5,000 and `10,000 were reintroduced in 1954 and all of them were demonetized in January 1978 .
• The `1,000 note made a comeback in November 2000 . `500 note came into circulation in October 1987 . The move was then justified as attempt to contain the volume of banknotes in circulation due to inflation .
• The banknotes issued during this period contained the symbols representing science and technology , progress and orientation to Indian art forms .
WINSPIRE : Empowering youth | December , 2016