ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Lost Due To Demonetisation

Sudden demonetisation of ₹500 and ₹1,0000 notes, an elimination of existing money stock that enables economic transactions, is bound to have an economic impact, apart from penalising those who hold this money as store of their tax-evaded illegal wealth. Considering various possible scenarios, a loss of gross domestic product will be inevitable.

On 8 November 2016, Prime Minister Narendra Modi met three defence services chiefs and the national security adviser. Speculations were rife on social media that India was embarking upon another punishing move against our recalcitrant neighbour. But the bolt from the blue came from elsewhere. The Prime Minster came on national television to announce what has been called a surgical strike against the black economy.

The stated objective of this demonetisation of high value notes of denominations 500 and 1,000 as per the Gazette notification (Ministry of Finance 2016) are: (i) to curb the menace of fake currencies; (ii) to wipe out unaccounted and tax evaded money stored in such high-value notes; and (iii) to prevent use of high denomination notes for terror financing.

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