Demonetisation is defined as the act of replacing old notes and coins of a particular currency with new notes of the same currency thereby rendering the rendering the old notes non-functional. Demonetisation has several instances across the global economy at different occasions for different reasons. In some cases, like the creation of the European Union, the Euro replacing the old currencies of the Eurozone, led to one kind of demonetisation. In similar instances across the world, replacement of an old currency with new one is a common cause for the demonetisation effect. Generally, a certain time period is allotted for public convenience to shift to the new currency. At other instances due to various reasons, notes or coins cease to be legal tender for monetary exchange when new notes of the same currency as introduced. This can be for various reasons too.
More recently, at the end of 2016, the ruling Indian government declared demonetisation of Rupees 500 and 100 notes in the entire Indian economy. This was a very significant decision, that received a lot of media, political and public attention from all over the world. It was heavily debated during its implementation and is being discussed even today. This is the reason the term demonetisation is being discussed in the global media currently.
The way demonetisation was introduced in the Indian economy was quite dramatic. Since one of the objectives was to cut down on illegal and criminal activities, and to cut down on illicit use of money, the Indian government decided to have a sudden announcement, at a very short notice, to the entire nation. So that the illegal and criminal users do not find enough time to take remedial actions against the demonetisation move. As a result, on 8 November 2016, the Government of India suddenly announced the demonetisation of two of the commonest notes in circulation at that time. These were the Rs. 500 and Rs. 100 Mahatma Gandhi series notes, which were to be replaced by new notes subsequently.
The recent demonetisation in India was and is still being heavily debated across the world. The Prime Minister of India was appreciated for the courage behind his decision.
By Janhavi
EdgeArticles 