A descriptive study of demonetization and its impact on Indian economy

Abstract The term demonetization is not new to the Indian economy. The highest denomination note ever printed by the Reserve Bank of India was the Rs 10,000 note in 1938 and again in 1954. But these notes were demonetized in January 1946 and again in January 1978, according to RBI data. Since less than 5 percent of population in India had access to such notes and most banks never had such currency notes, demonetization did not have a big impact on the country. The decision was taken to curb the illegal use of high denomination currency which was used for corrupt deals in the country. However, with the latest round of demonetization, the common public and bankers are undoubtedly facing hardship since more than 85 percent of currency in circulation has been rendered illegal in one single stroke. Demonetization is surely hampering the current economy and will continue to do so in the near term and will also impact India’s growth for the coming two quarters but will have positive long lasting effects. The question that arises is why demonetization was required at this point of time. There are certain pros and cons of demonetization