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TOPIC -21

Demonetization

Quick Points to Remember
• Indian economic system was left upside down within a fortnight. 8
th
November 2016 – this date deserves a special mention in the history of
Indian economy. Whether it was a total debacle or it was a beacon for the
seamless brighter economy, is still uncertain! But let’s focus on certain
facts which led to the sudden rollout of demonetization:
• Over the past few decades, the growth of the parallel economy was
boundless which gradually crippled the growth of the economy. Circulation
of fake currency, unaccounted transactions were becoming the biggest
obstacles in the path of steady economic growth. So, it was a masterstroke
to stop the growth of the parallel economy.
• Excessive cash circulations which were actually the funding for terrorists
and corrupt politicians became waste within a fortnight.
• Most importantly, it incorporated digital modes of payment systems which
include UPI codes, digital wallets and Merchant QR code scanners. No
chaos of cash! Transaction gets processed within a fraction of seconds.
• Cashless transactions undeniably narrow the scope of unaccounted
transactions and hence tax evaders found it difficult to escape.
• Tax revenue increased but subsequently, it helped the government to
sanction loans at quite less rate of interest.

Introduction: Is Demonetization truly a revolutionary change in Indian
Economy?
Well, dark clouds are still hovering and it’s not a child’s play to clean up the murky
tax evasion procedures. Parallel economy is not something which can be stopped
with one master stroke! Neither it’s feasible to incorporate 360° digital transactions,
owing to the bulk percentage of rural coverage. But yes, it was undoubtedly a hard

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