The most important argument in support of demonetization is that the process will help curb financial malpractices in the country.
This includes money for which tax is not paid or in other words, black money. It is believed that a considerable amount of black money is stored in denominations of 500 and 1000. Hence, by making them invalid, users will be forced to get rid of them. This will also help the government to find out the sources of black money circulating in the country.
As per the data from the Reserve Bank of India, the supplies of banknotes in all denominations have increased by 40 per cent in the past few years. But the number of currency notes in the denominations of 500 and 1000 has increased more than that. The reason given for this is the use of counterfeit notes.
These notes are used for many illegal activities like drug trafficking, financing terrorism, corruption etc.
Demonetization is also expected to fight such crimes too.
Besides, the process takes India a step ahead to the digital world. So in spite of the difficulties, many economists say that demonetization will help the country in the long run.