Answer to Question #255918 in Macroeconomics for Manu

Question

Demonetion has brought many changes in the Indian economy ' Comment this statement?

Answer 1

Demonition is the withdraw of a particular form of currency from circulation. Whenever a new currency is introduced the old one is pulled out from circulation. In order to counterfeit corruption,crime and tax evasion the Indian government, in 2016 demonetized the 500 rupee and 1000 rupee notes for newly introduced 500 rupee and 2000 rupee bills. Chaos were witnessed as people lined outside ATMs and banks since about 78% of Indian customer transactions are in cash. The new rupee notes have different specifications which required recalibration of ATMs. Only 60% of the 200,000 ATMs were working. Cash shortages were recorded even up to 2018. Small businesses strived to acquire cash and daily wage workers complained of non payment. The value of rupee fell sharply against the dollar.