When did first time demonetization took place in India?
Demonetisation is a radical monetary step in which a currency unit is declared as an invalid legal tender. This is usually done whenever there is a change in the national currency of a nation. Demonetisation is usually carried out to curb the menace of counterfeiting, black money and money laundering. The idea of demonetisation is not unique or new. It has been advocated in the past few years by various think-tanks and international bodies to curb the menace of tax-evasion, terrorism financing etc. Demonetisation was done when the European Monetary Union nations decided to adopt Euro as their currency. Other countries like Zimbabwe, Fiji, Singapore and Philippines have also opted for currency demonetisation in the past.
Why demonetisation was done in India?
The move was taken in India to curb the menace of black money, fake notes, and corruption by reducing the amount of cash available in the system. It has been observed that the fake Indian currency notes of higher denomination have rapidly increased making it difficult for ordinary citizens to distinguish them from genuine notes. These fake notes have been heavily misused by terrorists for anti-national and illegal activities. Since India is largely a cash based economy, containing the circulation of black money and fake notes requires the introduction of schemes like this.
Was this the first time the government is demonetising?
No, this is not the first time the government is following the policy of demonetization of high-value currency. The first instance of demonetisation by the government was implemented in 1946 when the RBI demonetised Rs 1,000 and Rs 10,000 notes. Later, higher denomination bank notes (Rs 1000, Rs 5000 and Rs 10000) were re-introduced in 1954. However, Morarji Desai government demonetised these notes in 1978. According to data provided by RBI Rs 10,000 note was printed in 1938 and 1954 and was subsequently demonetised in 1946 and 1978 respectively.