Demonetization -Stripping The Currency Of The Legal Status

Demonetization -Stripping The Currency Of The Legal Status

History repeats itself and once again India makes a strong stringent move under the able ministry of Mr.Narendra Modi to pull back Rs 500 and Rs 1000 currency from the market. It is smart signal to try to end corruption and hoarding of Black money.

It’s nothing new that has happened. History has repeated itself .Mr. Narendra Modi’s announcement on 8th December to pull off currency denominations of Rs 500 and Rs 1000 notes from circulation is indeed a calculated move to eradicate corruption , fake money and black money marketing from the country.


What is demonetization and why actually demonetization is done?
Demonetization is the act of stripping a currency unit of its status as legal tender Demonetization is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit.

Looking at the trend we see that Denominations of Rs 1000 and 5000 were taken out of circulation in January 1946.But the quick public nature and tactical ways of the black money hoarders slyly got them rid of the high denominations before the government could stop and hold them.

In the early 70”s Wanchoo committee , a direct tax inquiry committee set up by the government of India suggested Demonetization as measure to unearth and counterfeit black money. This method left the hoarders panicking and looking for the time when the currency will be rolled back. This method of demonetization has been quite effective.

The High Denomination Bank notes (Demonetization act) initiated by the then ruling Janata Party on Jan 16th 1978 again flabbergasted the public when they deemed Rs 1000, Rs 5000 and Rs 10,000 notes as illegal for the second time.

Effect on E-Commerce

Thanks to the development of electronic commerce, the most basic of economic transactions— the buying and selling of goods continues to undergo changes that will have a profound impact on the way companies manage their supply chains. E-commerce has altered the practice, timing, and technology of business-to-business (B2B) and business-to-consumer (B2C) commerce.

In spite of the ease of transacting for daily needs the Indian consumer is reluctant to take up to the digital ways. After the ban on the currency there is a possibility of increase in the consumer transactions as they are all card helped. Cash on delivery model will be impacted much is an expected result.

After the bold step of retorting to the neighboring country with surgical strike that invoked storm amongst the nation overnight, the next bold step Mr. Modi’s government has taken is to ban announced on the currency notes which leaves the nation gaping wide open and with multiple divided opinions . It also serves as a major assault on black money, fake currency and corruption.

Echoing support towards the government, various e-commerce companies have shown their positive sentiment towards Modi’s sudden move as bold and courageous.

Quoting a few E-Commerce players the mind out speaks as

Anurag Avula, CEO: Shopmatic
“This move will have a pronounced effect on e-commerce companies such as ours Shopmatic merchants benefit from integrated and seamless payment gateway options which makes life and business really easy for them. We welcome as many offline businesses to move to the online world.”

Amrish Rao, CEO: PayU India
“This is a welcome move by PM Modi for significant growth in Digital Payments. We will also see huge reduction in Cash on Delivery transactions. This will definitely provide boost to Internet commerce and Payments.”

Archit Gupta, Founder and CEO:
“This is a historic moment in India. No more black money. More people will be paying taxes, filing taxes and joining the mainstream economy.”

BA Ramesh, Joint MD of Thangamayil Jewellery:
“It is a laudable move. In the long term it will help all players like us in the organized market, but for the next few months we will see some pain.”

Overall there has been a positive sentiment in the e-commerce sector and curb of currency is expected to boost the gateway transactions .This will play a significant role in putting India on track to becoming the economic force it is intended to be.

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