Context: Indian Prime Minister recently said that Demonetisation has helped reduce black money, increase tax compliance and formalization and given a boost to transparency.
- On 8 November 2016, the government announced in its historic move to crunch high-denomination notes that constitutes 86% of the currency in the economy.
- The exercise spread chaos in the cash-dominated informal economy breaking supply chains and crippling small businesses and big businesses in some or the other manner.
- The Reserve Bank of India (RBI) issued over 60 circulars on the rules pertaining to cash/withdrawal and deposits in the following weeks. Confusion prevailed across different walks of life.
The motive of the crunch intended for the following objectives:
- Curbing black money in the economy in the form of cash
- Terminating cash-based corruption
- Killing fake currency
- Curbing terrorist activities
- Pushing digital transactions
- Widening the tax base
The positive impacts of demonetisation