Demonetisation and it's effect on the Indian Economy

Abstract

India, the fastest growing economy in the world, the largest democracy in the world and the second most populous country in the globe had to once face an arduous and complicated situation. Demonetisation is defined as the withdrawal of a coin, note or currency from being of legal tender. The above situation began when our present Prime Minister Narendra Modi with his associates on 8th of November, 2016 decided to put a ban on Rs. 500 and Rs. 1000 notes of the Mahatma Gandhi series. However, as has been mentioned by R Gandhi ( Ex- Governor to RBI), this ban was not decided on 7th of November itself but the government took its time and has started deciding on the ban since January of the same year4. This shows that the government gave itself considerable amount of time to prepare and plan on the ban which would affect the giant country and population. Time given however was not sufficient as the plan which was executed was in no way equivalent to what could have been planned within the TIME available. High denomination notes have been banned twice before this act. Once in January 1946, when India used to have 1000, 5000 and 10000 denomination notes. These notes were however re launched in 1954. The second time when these notes were banned was when Morarji Desai (Ex- Prime Minister of India) declared 1000, 5000 & 10000 rupee notes to be illegal. This happened on the 16th of January, 1978. There are several criticisms that are ready against demonetisation but the benefits of the same should also be considered. This process of banning the notes of the highest denomination did not have known benefits in the short run but when considered in the long run, the same process was beneficial.