DEMONETISATION: A BOON OR A BANE?
Removing the legal tender status of a unit of currency is a drastic intervention into an economy
because it directly affects the medium of exchange used in all economic transactions. It can help
stabilize existing problems, or it can cause chaos in an economy, especially if undertaken
suddenly or without warning. That said, demonetization is undertaken by nations for a number of
reasons. Demonetization is referred to as the process of stripping a currency unit of its status to
be used as a legal tender. In simple words, demonetization is the process by which the
demonetized notes cease to be accepted as legal currency for any kind of transaction.
Demonetization can cause unrest in an economy or it can help in stabilizing the economy from
existing problems. Demonetization is usually taken by a country for various reasons.
Demonetization in India has taken place three times till now, namely in the years of 1946, 1978
and 2016. Let us have a look at all the three events.
The first currency ban:
In 1946, the currency note of Rs 1,000 and Rs 10,000 were removed from circulation. The ban
really did not have much impact, as the currency of such higher denomination was not accessible
to the common people. However, both the notes were reintroduced in 1954 with an additional
introduction of Rs 5,000 currency.
The second:
