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Dear Readers,
In order to keep you one step forward and to boost your General Knowledge and
con dence level, here we are presenting you the most important topic of the
moment “The Demonetization” in our Spark Plug series. This will surely help you
in your General Awareness Section in the exam and interview preparation.
On 8th November 2016 GOI made history by taking a striking bold step to
demonetize Rs.500 & Rs.1000 note to reform the nance sector.. Making 86 per
cent of the currency in circulation illegal in one stroke.
Demonetization is the most people friendly step ever taken by any government
ever in history.
(http://gs-blog-images.grdp.co/blogs/wp-
content/uploads/2016/11/30182409/51.jpg)
It is a shocking experience for the whole country. The 14.90 lakh crore high
denomination notes almost 70 percent was kept as black money, hidden away
from the banking system by those who have stored safely in a secret place away
from the national wealth.
Black money is the biggest source of corruption. It leads to inequality and price
rise and devaluing the currency. Equally worrying is the presence of huge chunks
of counterfeit currency funding terror, crime and subversion in the country. All
agree that the share of counterfeit money in circulation is almost equal to the
black money in circulation.
Supporters of Demonetization:
Most well meaning economists including
Former RBI governors K. Subba Rao
C. Rangarajan
Dr Meghnad Desai
Dr Surjit Bhalla
Demonetization:
Withdrawal of a particular form of currency (such as gold coins) from circulation.
Why Indispensable?
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12/1/2016 Spark Plug: The Demonetization
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content/uploads/2016/11/30182229/4.jpg)
Instructions be issued to banks to report to CBDT or FIU, the transactions
which fall in the following category:
Large cash deposits are made in any account above a particular threshold.
People holding black money may also use poorer people to convert their
money into white by parking the money in their bank accounts.
Cash deposits made by jewelers should be correlated with their sales and
PAN number of the buyers of jewellery.
(http://gs-blog-images.grdp.co/blogs/wp-
content/uploads/2016/11/30181912/3.jpg)
Tax evasion - Tax evasion is the illegal evasion of taxes by individuals,
corporations, and trusts. Tax evasion often entails taxpayers deliberately
misrepresenting the true state of their affairs to the tax authorities to
reduce their tax liability and includes dishonest tax reporting, such as
declaring less income, pro ts or gains than the amounts actually earned, or
overstating deductions.Tax (http://deductions.Tax) evasion is an activity
commonly associated with the informal economy.
Positive effects:
The crackdown on black money by demonetization will bring down the
in ation
The move will ensure that transactions will now go much more through the
banking systemwhich will ensure transparency.
This will bring prices and lending rates down. This is bound to encourage
investment. This will stop the use of black and fake money in crime and
terror activities and make life safer for the common man.
The drive on black money will bring more revenue to the government’s kitty
making it possible to spend more on infrastructure, welfare schemes, health
and education. The days of capitation fees are over. Education will no more
be business as usual.
The road map the government has aims at creation of an egalitarian social
structure, eliminating power brokers, black money and corruption with a
focus on equitable distribution of wealth.
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12/1/2016 Spark Plug: The Demonetization
(http://gs-blog-images.grdp.co/blogs/wp-
content/uploads/2016/11/30181650/2.jpg)
Transportation halts: After the demonetisation was announced, about
800,000 truck drivers were affected with scarcity of cash, with around
400,000 trucks stranded at major highways across India were reported.
Agriculture: Transactions in the Indian agriculture sector are heavily
dependent on cash and were adversely affected by the demonetisation of
500 and 1000 banknotes
Banking: In the rst four days after the announcement of the step, about 3
trillion rupees in the form of old 500 and 1000 banknotes had been
deposited in the banking system and about 500 billion rupees had been
dispensed via withdrawals from bank accounts, ATMs as well as exchanges
over the bank counters.
Business: By the second week after demonetisation of 500 and 1000
banknotes, cigarette sales across India witnessed a fall of 30–40%,[145]
while E-commerce companies saw up to a 30% decline in cash on delivery
(COD) orders.
Municipal and local tax payments: As the use of the demonetised notes had
been allowed by the government for the payment of municipal and local
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12/1/2016 Spark Plug: The Demonetization
body taxes, it led to people using the demonetised 500 and 1000 notes
to pay large amounts of outstanding and advance taxes.
Income tax raids and cash seizures
Stock market crash
Loopholes
Gold purchases - In Gujarat, Delhi and many other major cities, sales of gold
increased on 9 November, with an increased 20 to 30% premium surging the
price as much as 45,000 from the ruling price of 31,900 per 10 grams
(http://gs-blog-images.grdp.co/blogs/wp-
content/uploads/2016/11/30181549/1.jpg)
Donations - Authorities of Sri Jalakanteswarar temple at Vellore discovered
cash worth 4.4 million from the temple Hundi.
Multiple bank transactions - There have also been reports of people
circumventing the restrictions imposed on exchange transactions and also
attempting to convert black money into white by making multiple
transactions at different bank branches.
Railway bookings - As soon as the demonetisation was announced, it was
observed by the Indian Railways authorities that large number of people
started booking tickets particularly in classes 1A and 2A for the longest
distance possible, to get rid of unaccounted cash.
Thanks
Team GradeUp..!!
(/user/ankita-
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12/1/2016 Spark Plug: The Demonetization
gupta- Ankita Gupta (/user/ankita-gupta-i-21c790f9-e396-11e5-88f5-f34813ef5abe)
9 hours ago
Thanku sir..... plz add imp limit n % in this post
UPVOTE 0
Nijeesh (/user/nijeesh-i-9f0261e5-e095-11e5-b6e1-27d151962837)
(/user/nijeesh-
i- 6 hours ago
UPVOTE 0
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