Demonetization and its impact on Indian economy

Abstract

The demonetization of Indian currency in 2016 by Prime Minister Narendra Modi has been one of the most hotly debated economic events in recent history. In a landmark move, the Indian government removed currency worth INR 15.4 trillion which accounted for more than 85% of the total Indian currency in circulation. On the economic front, the primary motivation for demonetization was to tackle India’s age old problem of wide spread corruption and to address the pressing issue of ‘Black Money’. In addition, the move was championed as India’s thrust for large scale digitization of the financial sector coupled with a strong technological ecosystem. Ever since the implementation of demonetization, the jury however has been divided on the viability of the action to address black money, its timing and equally importantly its method of execution. As the preliminary data now starts to flow in on its on-ground impact, through the course of this project, we seek to evaluate the state of the Indian economy one year after demonetization and critically analyze its short and long term impacts.