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The Impact of Demonetization On Indian Economy

Priyanka Kumari and Rakshanda Savarnya, students at Banasthali Vidyapith Rajasthan, analyzed the impact of India's 2016 demonetization on the economy. Demonetization withdrew Rs. 1000 and Rs. 500 notes from circulation, replacing them with new currency. This sparked debate, with some supporting the move to curb corruption and black money, while others criticized the hardships it caused. While the goals were to reduce corruption, cash transactions, and tax evasion, analysis found that only 12% of illicit money could be recovered in the short term, with long term economic impacts still uncertain.

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Rakshanda Savarnya
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105 views5 pages

The Impact of Demonetization On Indian Economy

Priyanka Kumari and Rakshanda Savarnya, students at Banasthali Vidyapith Rajasthan, analyzed the impact of India's 2016 demonetization on the economy. Demonetization withdrew Rs. 1000 and Rs. 500 notes from circulation, replacing them with new currency. This sparked debate, with some supporting the move to curb corruption and black money, while others criticized the hardships it caused. While the goals were to reduce corruption, cash transactions, and tax evasion, analysis found that only 12% of illicit money could be recovered in the short term, with long term economic impacts still uncertain.

Uploaded by

Rakshanda Savarnya
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Priyanka Kumari (1712520),

Rakshanda Savarnya (1712524)


B.Tech (CS) VI Semester
Department of Mathematics and Computing
Banasthali Vidyapith
Rajasthan-304022

The Impact of Demonetization on Indian


Economy

Demonetization is the withdrawal of a particular form of currency from circulation. Through


demonetization the old currency is replaced by the new currency or a currency circulation is
blocked. Demonetization is one of the most trending topics which occupied the columns of
Indian Newspaper on last 2016.

On November 8, 2016 when everyone sat struck to their television eagerly waiting for the
announcement of winner of the presidential elections for USA, the Prime Minister of India
Narendra Modi announced on television that Rs 1,000 and Rs.500 notes will no longer be legal
tender from midnight that day. However, this wasn’t the first time, this has happened, in 1946
when the Reserve Bank of India demonetized the then under-circulation Rs 1,000 and Rs
10,000. Higher denomination banknotes of Rs 1,000, Rs 5,000 and Rs 10,000 were introduced
eight years later in the year 1954. These very notes were also demonetized by Morarji Desai
Government in 1978.

The announcement of demonetization tore the country into three categories, while some
applauded the decision appreciating, calling it a bold decision others became hardcore
protestor, while some chose to remain fence sitters. The objectives behind this move are to
attempt to make India a corruption free country, to curb black money, to control escalating price
rise, to stop fund flow to illegal activity and to make the people accountable for every rupee the
possess and pay income tax return. Corruption in India is not merely an evil of the society but
an accepted part of every person’s life in the country. Removing that part with changing
currency of “cashless economy” has come up on idea of corruption and black money free India
and bringing transparency in the transactions. According to transparency international
corruption India, even though India is still the most corrupt country in Asia, corruption related
reports have reduced by 10% since 2015. India rating and research had concluded that only
12% of the ill-gotten money could be extracted with the idea of demonetization while 88% of
black money is still in circulation in Indian markets. It is very difficult to predict the effect of this
move on the economy and the citizens in one sentence. Indian economy will see a big boom. It
will abridge the gap between have and have not. However there may be so difficulties for couple
of months but these conveniences shall be temporary and hardship is their short term may yield
benefits in the long term.

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