Pros and Cons of 500 and 1000 Rs. Currency Demonetisation In India

Demonetisation means the act of removing a unit currency’s status as a legal tender.  The old currency unit must be returned and reinstated with the new currency unit. Recently in India the demonetisation of Rs.500 and 1000 was taken place as per the order of the Government of India. It came as a surprise to everyone. This plan was kept in secret between the higher authorities until the official announcement has been made for various reasons. The announcement was made by Narendra Modi,

The honourable Prime Minister of India on an unscheduled live telecast at 20:15. In that announcement Mr. Modi declared that Rs.500 and Rs.1000 will be no longer valid and he announced the introduction of the new Rs.500 and Rs.1000. As usual it was welcomed with various criticisms.  The exchange are done only up to 30th December 2016. The immediate impact will be heavy deflation. Since the illegal money like black money, counterfeit money can no longer be used and those who have black money will be afraid to announce in the fear of being prosecuted by the Government and their reputation going awry, the currency circulation will be reduced in the economy leading to deflation.

500 and 1000 rs, new note


  • Since the Rs.500 and Rs.1000 was made invalid. The only way to change them is if you have legal documents for that money. So the black money cannot be changed and it would be no longer in the use. In this way most of the black can be destroyed in India.
  • The counterfeit money produced and moved in the market will be in vain. The counterfeit money can almost be completely reduced. It is said to be very hard to make counterfeit money resembling the new Rs. 500 and Rs.1000, since the papers and ink are of specific kind and cannot be obtained easily.
  • The funding of the terrorists attacks are manly done by the counterfeit notes, hence the terrorism is expected to be reduced in great measures.
  • To change the old money people have, it would be easier if they have a bank account and an ATM card, so many people will start an account in the bank to handle the money easier thereby increasing the number of card transactions rather than the paper transactions.
  • It will be easier for the Government to monitor the money since the exchange can only be done by valid Government identity.
  • The Government has announced seven years imprisonment and fine to the benami transactions in the hope of reducing it.
  • This will help to bring more transparency to the real estate sector and making them more credible.
  • This will help reduce the artificial increase in Higher education, Health care and Real Estatetransaction. Thus making them within the reach of the common man.
  • It was also done in order to reduce smuggling, corruption and drugs.


  • Since the announcements has been made many people have gathered in the banks. If you want to change your money you have to stand in long queues for hours together to exchange your invalid money. It is of great inconvenience for the people who are already busy with their lives.
  • As of now only Rs.10,000 per day and Rs.24000 per week can be withdrawn from bank and from ATM only 2500 per day. Thus making a great disturbance to the people who are in need of more than that.
  • Large companies who have to make huge transactions as part of their daily business suffer due to the unavailability of the liquid cash and existing transaction are stopped due to this.
  • Since the announcement, there are already brokers available who are ready to exchange the black money in the bank by distributing the money among the people. So the black money can be converted to legal money but only in small amount.
  • In the of future, Rs.2000 note will be easier to store as a result more black money can be hidden safely.
  • The printing of new money is done by using the tax we pay.

The banks have only released Rs.2000 in many places. So it will be hard for people to get change for Rs.2000.






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