Six Years On, Has Demonetisation Achieved The Goals It Set Out To?

Six years after India demonetized currency of ₹ 500 and ₹1000, has the financial exercise achieved its goals?

Demonetisation set out to achieve three goals. Did it work?

(Image: Vibhushita Singh/ The Quint)

Demonetisation was announced on 8 November, 2016. The aim of the exercise?

• Eliminating black money from the Indian economy

• Stopping the spread of counterfeit currency notes

• Creating a "cashless" economy

Six years since the biggest economic reform in India since 1991, has demonetisation achieved the goals it set out to?

Did demonetisation eliminate black money from the Indian economy?

Seizures of black money or untaxed/undeclared income continue into 2022, six years since demonetisation, with the Central Board of Direct Taxes (CBDT) registering at least 592 cases to the tune of ₹40,000 crore as of February 2022.

Did demonetisation kill counterfeit currency and the spread of fake notes?

The RBI in its annual report for 2021-22 reported a 101 percent rise in seizures of fake notes of the value of ₹500 and a 54 percent rise in fake currency notes of ₹2000 In its May 2022. Apart from this, it added that there was an increase of 16.4 percent, 16.5 percent, and 11.7 percent counterfeit notes in the denominations of ₹10, ₹20, and ₹200 respectively.

From 2016 to 2020, in total over 18.75 lakh fake notes were seized, the RBI adds.

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'DeMo Achieved Objective of Eliminating Counterfeit Notes'

According to finance expert S Kalyanasundaram, writing for The Hindu Business Line, "DeMo's first objective of identifying and eliminating counterfeit notes has been achieved as all the notes were verified for genuineness. Terror activities and drug trafficking too have been curbed to a large extent, as demonetization had cut off their financing."

Corporate strategy expert Sandip Ghose, writing for MoneyControl, states:

"Demonetisation has by accelerating digitization pushed the iceberg of the dark economy above sea level. The results are visible in higher revenue collection despite an economic slowdown that has enabled the government to finance welfare schemes during a humanitarian crisis."

'Over ₹2 Lakh Crore Economic Loss In The Year After DeMo'

In an article for The Indian Express, Praveen Chakravarty, however, digresses, and says:

"India’s use of cash, at 14 percent of GDP, is among the highest of all major economies compared to 3 percent for developed nations and 5-7 per cent for developing nations like Bangladesh and Indonesia."

He also adds:

"In FY2018, GDP growth fell sharply from 8.3 percent to 6.8 percent. There was an economic output loss of nearly Rs 2 lakh crore in the year post-demonetisation."