Question

RBI’s latest demonetisation measure was declared on 19^th May 2023. As per RBI’s ‘clean note’ policy, it withdrew all ₹2,000 notes from circulation. In context of the above statement answer the following questions:

1. What is demonetisation?
2. State any three objectives of demonetisation.

Answer 1

1. Demonetisation refers to the process by which the government declares certain currency notes as no longer legal tender. It involves withdrawing specific denominations of currency from circulation.
2. The three main objectives of demonetisation are:
   1. Eliminating black money: It aims to curb unaccounted or undisclosed money and reduce tax evasion.
   2. Reducing corruption: Demonetisation seeks to limit bribery and corrupt practices by restricting the use of unreported cash.
   3. Promoting tax compliance: It encourages people to disclose their income and pay taxes, thereby increasing government tax revenue.