Three years ago, on this day, demonetization was announced declaring 86 percent of the currency in circulation invalid. Prime Minister Narendra Modi made the shocking announcement of banning the use of old 500 and 1,000 rupee notes with a view to curb black money, promote digital payments and makes the country a less-cash economy.

While bringing demonetization, Modi had said that demonetization is vital to break the back of terrorism and corruption as it will eliminate the black money from the system.

Three years have passed but none of these goals seem to have been met. Terrorism is as big a threat still today as it was three years back. And, the attacks in Gadchiroli and Pulwama are the burning example of it. While many people support this initiative.

Three years down the line, in an online survey conducted by LocalCircles, 66 percent of respondents have said that demonetization had brought numerous negative impacts on the economy. Only 28 percent of the respondents said that demonetization did not have any negative impact.

33 percent of those participating in the survey said that due to demonetization economic is slowing down. They also said that when demonetization was announced at that time the Indian economy was flying high.

Let’s compare the positive and negative impact of note-ban on different sectors in the country:


It was said that demonetization would bring down cash usage in the economy it was the temporary outcome. Later the total currency in circulation has surpassed pre-demonetization levels. Even the most shocking fact is that cash-to-gross domestic product (GDP) ratio is inching back towards pre-demonetisation levels of 12%.


The government had strongly support note-ban in the name of digitalization. But demonetization did not bring any enhancement in digital payments. Digital payments have grown immediately after demonetization but it was just a reaction to the immediate cash shortage and did not have a lasting impact on people’s transaction behaviour.


As per the report of Labour Bureau’s Sixth Annual Employment-Unemployment Survey, in 2016-17 the unemployment rate increased when the government demonetized old currency notes. Over five million people lost their jobs from 2016 to 2018, and the labour force participation started declining suddenly between September and December 2016 for both urban and rural men.


At the time of demonetization, the total number of developers in the leading nine Indian cities shrunk by over 50 per cent. The financial distress of small developers, lack of execution capability and over-supply of inventory played a key role in the downturn. As per analysts, a huge number of fly-by-night developers were forced to leave the market at that time.


Despite the normal monsoon season, the overall incomes of farmers from crop cultivation and wages of farm labourers decreased badly during the period. However, there was a positive result also, agriculture as a whole, the output from fishing and livestock grew the fastest in 2016-17. The growth was nearly 10 percent over the previous year.


Investment in the country’s factories had shown their worst performance, contracted 10.3 percent over 2016-17 when the demonetization was implemented.

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