Demonetisation

 Demonetisation in India refers to the monetary policy implemented by the Indian government on November 8, 2016. The policy involved the sudden withdrawal of ₹500 and ₹1,000 denomination banknotes, which accounted for approximately 86% of the total currency in circulation at the time. These notes were rendered invalid as legal tender overnight, and new ₹500 and ₹2,000 denomination banknotes were introduced to replace them.

The primary objectives of demonetisation were to curb corruption, eliminate black money (undeclared wealth), eliminate counterfeit currency, and promote digital transactions. The government aimed to disrupt illegal activities, such as tax evasion, corruption, and terrorist financing, by invalidating high-denomination notes that were often used for these purposes.

The demonetisation policy was met with a mix of support and criticism. Supporters of the move praised it as a bold and necessary step to address corruption and black money, while critics argued that it caused significant disruptions to the Indian economy and resulted in hardships for the common people, particularly those in rural areas who heavily relied on cash transactions.

The sudden withdrawal of high-value currency led to long queues at banks and ATMs, as people rushed to exchange their old notes for new ones. There were temporary cash shortages, as the new notes were not readily available in sufficient quantities, which impacted businesses and daily wage earners. The informal sector, which heavily relies on cash transactions, was particularly affected.

The impact of demonetisation on achieving its stated objectives has been a subject of debate. While the move did lead to a temporary increase in digital transactions and the formalization of some parts of the economy, studies have shown that the overall impact on black money and corruption was limited. The Reserve Bank of India (RBI) reported that the majority of demonetised notes were eventually deposited into banks, suggesting that the move did not effectively eliminate black money.

The Indian government has implemented several measures and initiatives to promote digital transactions and financial inclusion since demonetisation. These include the introduction of Aadhaar (biometric identification system), the Unified Payments Interface (UPI), and the Goods and Services Tax (GST). These initiatives aim to create a more transparent and digital economy.