All About Demonetization of

Rs.500 and 1000

What Is Demonetization?

Demonetization is the act of stripping a currency unit of its status as legal

tender.
(or)
Demonetization refers to discontinuing of current currency units and replacing
those currency units with new currency units.
Demonetization is necessary whenever there is a change of national currency.
The old unit of currency must be retired and replaced with a new currency unit.

About Present Demonetization

The demonetization of Rs.500 and Rs.1000 bank notes was a step taken by
the Government of India on 8 November 2016, as a form of legal
tender in India from 9 November 2016.

The demonetization was done in an effort:

To stop the counterfeiting of the current banknotes alleged to be
used for funding terrorism
Crack down on black money in the country.

The move is also aimed at reducing corruption, drug menace

and smuggling.

Demonetization in past

Impact of Demonetization on Different Sectors

Building Material Sector:

It may get impact on the back of slow demand in the near terms of
medium terms as all transactions to service providers like architect,
carpenter, painter, labour will get impacted on a larger proportion of
service providers don't provide bills

Banking Sector:
It is expected to benefits as more money will flow into the formal
sector. We expect banks to benefits in terms of more deposits, especially
low cost deposits.

Cement :
Companies and dealers are indicating that volumes may get
impacted in the near terms as real estate demand and may get affect in the
interim.

Capital Goods :
The impact won't be big largely due to the B2B nature of
business. However payment to sub-vendors may face some liquidity issues

Jewellery Companies:
It also get impacted as they see slow down in sales.

Auto Mobiles :
To dip for a couple of months for two wheelers, but passenger
vehicles and tractors will be less impacted.

Real Estate :
It will be one of the most affected sectors. The number of buyers
will come down and low demand will bring about lower prices in the short
term.
Housing Finance Companies :
It is likely to witness some stress on loans given to real estate
developers who is likely to face liquidity crunch in the short term.

Pharma :
Demonetization is expected to have any major impact on the
Indian Pharma market and demand is not expected to get impacted in a big
way.

Power & Coal :

A possible fall in the interest rates will be positive for yield
players.

Consumption Sector :
They impact as there is a temporary slow down in spending.
These companies had got impacted in the past when PAN card was made
mandatory for high value transactions.

Advantages
It will help to control the Black money to a Little extent. But what with
the Black Money that lies in Property and Gold.
It will help to stop the funding of Terrorist. This is wow benefit of
demonetization.
It will totally clear the Fake currency from India Now.
This will also make sure to circulate all your money of 500 and 1000 note
to Bank.
This will also make tendency of using Plastic Money which makes
economy better.

Cont..

All Black money will come Out from the treasure.

This will narrow the Gap of Rich and Poor with very little extent.

Apart from this advantages of new notes are that this will clear all waste
notes from the system.

Disadvantages

It will cause great inconvenience to common man who will start running to
bank to exchange Rs.500 and Rs.1000 notes.

By replacing all the Rs.500 and Rs.1000 denomination notes, as ordered by

the government, could cost the RBI at least Rs.12000 crore.

It will be very difficult for half of the population who are not well versed
with the card transactions.

The major problem is that big fishes will be left out whose black money is
in the form of foreign currency, gold and property and stashed in tax
havens.

Conclusion

The advantages are much dominating and it will be in the long term
interest of our country comfortably outweighing the disadvantages.

Government need to take all the necessary steps so as to ensure that there
will be a smooth flow of currency exchanges.

It would turn into chaos if government takes no necessary steps to circulate

money correctly. It will make a massive change in our economy.

We congratulate the entire government and those hidden brains of our

democracy who brought this decision.