1.1 of making the economy stable and

1.1       Background of the Study

The issue of world economy, invention of
currency and the updates of the same have gone through a rigorous change. The
development trends have demarcated the strength of the currencies of various
nations and hence we find that all the currencies of the world are not the same
and have the same value. In the process of making the economy stable and
stronger, check the corruption and regulate the currency, various nations at
times have adopted the path of demonetization. Demonetization is a process by
which a series of currency will not be rendered legal as a tender with the
stated time frame. The series of currency will not be acceptable as valid
currency and those will take the form of the historic bills as of the date that
they will be made outdated.

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As of the year 2016, India announced the
demonetization of its 500 and 1,000 Rupees currency bills and promised its
citizens that it would come up with the new currency bills swiftly without any
hindrance. The issue took a serious turn and many accusations were made to the
government of being bias and pushing the economy backwards. The government
announced that demonetization was being done in as an effort to stop
counterfeiting of the current currency notes allegedly used for funding
terrorism, as well as a crackdown on black money in the country.

The process of demonetization occurs whenever there is a change of national
currency. The currency in use are made invalid from circulation and made
ineffective and are often to be replaced with new notes or coins.It refers to an economic policy where a
certain currency unit ceases to be recognized or used as a form of legal
tender.The government can take such decisions to stop the circulation of a
denomination of notes or a coin in the economy. The currency unit that has been
demonetized is withdrawn from circulation. During the implementation of this
policy, the currency unit that has lost its status as a legal tender is
deposited with the banks or other authorized financial institutions and
replaced with units that still have legal tender status(Kumari, 2017).The moves
also aim at reducing/eradicating the corruption, drug menace, and smuggling and
to eliminate terrorist and extremist activities. 


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