. Explain any four features of demonetization

Best Answer


  • 'Demonetization' is a game-changer in India. 
  • It means withdrawal of currency notes of one denomination and putting into circulation newly designed notes of the same denomination. 

The features of demonetization are as follows: 

  • Demonetization hurts many people who have collected cash when they are unable to deposit it in banks due to identification problems in India orbecause they no longer trust government institutions and banking systems after years of oppression and isolation from banking services. 
  • Historically, the most common reason for demonetization has been to combat inflation when a particular monetary unit has become too valuable. 
  • Inflation happens when the value of money drops over time. 
  • As prices rise, it takes more units of money to buy something. 
  • When this happens, the government will often begin printing new money at a faster rate to keep up with demand. 
  • In extreme cases, this can cause hyperinflation, which is when prices double every few months. 
  • After hyperinflation occurs, a country must change its official currency to its value.

Final answer :

Features of demonization:

  1. Preventing black money generation: 
  • Cash transactions are hard to trace and have been a major source of black money. 
  • With demonetization, large cash reserves became useless, and most such money was deposited into banks. 
  1. Stopping fake currency:
  • The printing and circulation of fake currency have also been a major concern for security agencies. 
  • With demonetization, all fake notes in circulation became worthless as well.
  1. Terror funding:
  • A large share of terror funding was made possible through counterfeit currency networks.
  • These networks have been affected due to demonetization. 
  1. The burden on the economy:
  • One estimate suggests that the cost of maintaining cash in circulation amounts



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