Liberalisation, Privatisation And Globalisation — Economics STD 12 Humanities & Commerce — Question

Disadvantages of demonestiation: Demonestiation is not all beneficial and even proponents of demonetisation acknowledge that it does have its disadvantages. A few of them are outlined below.

1. Little cash in circulation: Cash crunch is a major disadvantage of demonetisation due to the unavailability of small currency denominations, an issue which makes it difficult to make small purchases.
2. Inconvenience and annoyance to the public: Sometimes, demonetisation can be very inconvenient. For example, sometimes the government will remove certain denominations of bank notes from circulation but keep others. It can be annoying when smaller coins are removed from circulation and you do not have enough change. Further, queuing up in banks to deposit money or exchange currency can be inconveniencing.
3. Slowdown in Economic Growth: Economic growth will experience a period of lull due to business disruptions, at least in the short term.
4. Panic: Not everyone understands the essence of demonetisation and, therefore, such an exercise is likely to result in panic among a section of the population.)
5. An avenue for fraud and corruption: Some people are likely to take advantage of lapses in the financial system to engage in fraud and corruption when exchanging currencies.
6. Disruption of Trade: The normal trading activities may be disrupted by this process since it takes time for consumers and suppliers to adjust to the new monetary policy.