Question

Mention the objectives of demonetizations.

State the objectives of demonetisations.

Answer 1

Objectives of Demonetisation:

1. Removing Black Money from the country.
2. Stopping Corruption.
3. Stopping Terror Funds.
4. Curbing Fake Notes.

Demonetisation is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change in national currency. The current form or forms of money are pulled from circulation, often to be replaced with new coins or notes.

Answer 2

Demonetisation of currency in India was done to achieve the following objectives:

1. Elimination of Black Money: Black money refers to unaccounted money. This kind of money is accumulated by people by not paying the due amount of tax and by indulging in illegal activities. The aim of the government was to eliminate black money from the economy.
2. To Curb Corruption: Illegal transactions (e.g., bribery, smuggling, etc.) are commonly carried out through high-value notes. The government wanted to eliminate the root cause of corruption through demonetisation.
3. To Eliminate Counterfeit Currency: Another objective of demonetisation was to eliminate counterfeit currency. There was a huge amount of fake currency in circulation. This counterfeit currency was causing inflationary pressure in the economy.
4. To Check Terror Funding: Demonetisation was also aimed at elimination of terror funding. High-denomination notes were being used for terror activities. Terror activities would automatically come to an end in the absence of finance.