This concept surely seems familiar to all of us, as it is now filling newspapers and newsrooms across the country.
Demonetization is the legal act of making a currency invalid, and replacing it with a new one. In other words, it could be the removal of a particular currency, say Rs 500, from circulation, and issuing a new one of equivalent value or denomination. Demonetization also happens when the currency of a nation changes.
Many instances of demonetization have taken place in the world. One classic example would be the withdrawal of currencies in countries under the European Union to replace them with the euro. However, it was not a sudden and unexpected move. People in those countries were given enough time to convert the older currencies to the euro in order to ensure a smooth transition.
Such a move could definitely affect people, but as a process, demonetization has proved effective in controlling counterfeiting and black money in any country.