The government of India announced Demonetization of 500 and 1,000 currency notes with effect from the midnight of November 8, 2016. As a result, the existing 500 and 1,000 currency notes ceased to be legal tender from that date. New currency notes of the denomination of 500 and 2,000 were issued by Reserve Bank of India after the announcement.
This step resulted in a substantial increase in the awareness about and use of Point of Sale achines, e-wallets, digital cash and other modes of cashless transactions. Also, increased transparency in monetary transactions and disclosure led to a rise in government revenue in the form of tax collection.
a. Enumerate the dimensions of business environment highlighted above.
b. State the features of Demonetization.
a. The above case explains the economic environment of the business. The economic environment of the business refers to the changes in the system due to the economic policies made by the government. The Reserve Bank of India is an important regulator of the country's economic development.
b. Demonetisation refers to the withdrawal of the status of legal tender to the currency in circulation.
The features of demonetization are:
a. Demonetisation aimed at eliminating the stock of black money in the economy. Black money is unaccounted money. The people had to declare their unaccounted money and pay the tax as a penalty.
b. Since black money is there a root cause of bribery. This social evil was targeted to be removed from the foundation itself.
c. It also aimed at eliminating the counterfeit money. This type of money destabilizes the economy and increases the money in circulation leading to inflation.
d. It also targeted at keeping a check on the money laundering which refers to the hidden transfer of funds across the country.
e. It was expected to promote digital transactions in the economy. Fire the level of digital transactions means lower the level of cash transactions. It would shift the economy from a cash economy to a cashless economy