Impact of Demonetization on the Indian economy

Abstract

Demonetization is a major landmark in the Indian economy. It creates fear among the people who are engaged in illegal activities like tax evasion, money laundering etc. Indian Government on November 8, 2016 announced that the 500 and 1000 rupee notes will have no legal tender. About 86 percent of the country’s total value of cash supply is in the form of 500 and 1000 rupee notes. Here the main objectives of the Government was to curb inflation, eliminate black money, eliminate terror funding, fight against tax evasion, root out counterfeit currency and to promote a cashless economy. Due to this announcement the common people faced a huge problem in meeting their daily transaction. We also observe that the growth rate of the economy falls due to this demonetization. Demonetization also creates some adverse effect on the Indian economy. Many economists and politicians have questioned regarding the way how demonetization was implemented on the Indian economy. Many people also opposed this decision of the Indian Government. In this paper we try to analyse the different aspects of demonetization. We see that in the short run demonetization creates some problems on the economy, but it is not the high time to comment what will be the impact of demonetization on the Indian economy in the long run.