Demonetisation: Where It Worked and 

Where It Didn't

In 2016, the Indian government invalidated the 500 and 1000 rupee notes, which accounted
for 86% of cash circulation, as part of demonetization. The goal was to reduce black money,
corruption, and counterfeiting, but the effects varied across different sectors.

There are several aspects to consider when evaluating the impact of demonetization. Some of
the ways in which it worked include:

1. Curbing black money: Demonetization was expected to flush out the black money
that was being hoarded by individuals and businesses. The idea was that people with
unaccounted wealth would not be able to exchange their old notes for new ones, and
therefore their wealth would become worthless. This helped in curbing the generation
of black money in the short term.

2. Increased digital transactions: With the shortage of cash, people started adopting
digital modes of transactions. This helped in promoting a cashless economy and
reducing corruption. This led to the growth of digital payment companies and
increased financial inclusion.

3. Real estate: Demonetization helped to bring down property prices.

However, demonetization also had several negative impacts, including:

1. Agriculture: The agriculture sector was hit hard by demonetization as farmers were
unable to buy seeds, fertilizers, and pay laborers due to the cash crunch.

2. Job losses: The slowdown in economic activity led to job losses in the informal
sector, which employs a large percentage of India's workforce.

3. Small businesses: Demonetization affected small businesses as they were heavily

reliant on cash transactions. Many businesses had to shut down or suffered losses due
to the cash crunch.

4. GDP: Demonetization had a negative impact on the GDP growth rate as economic
activity slowed down due to the cash crunch.

5. Inconvenience to the public: The sudden announcement of demonetization and the

subsequent cash shortage caused a lot of inconvenience to the public, who had to
stand in long queues at banks and ATMs to withdraw cash.

Demonetization had positive and negative effects, varying across sectors. It formalized the
economy and boosted digital payments, but hurt small businesses, agriculture, and GDP
growth. While curbing black money and promoting digital transactions, it caused economic
slowdown and public inconvenience. Careful evaluation of policies is crucial before
implementation.

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 Cashless economy- success or failure

A cashless economy refers to a system where most transactions are conducted using digital
payment methods instead of cash. The success or failure of a cashless economy can be
evaluated based on several aspects, including:

1. Convenience: One of the main advantages of a cashless economy is convenience.

Digital payment methods such as credit/debit cards, mobile wallets, and online
banking can make transactions faster, easier, and more secure.

2. Financial inclusion: A cashless economy can promote financial inclusion by

allowing people who don't have access to traditional banking services to participate in
the economy through mobile wallets and other digital payment methods.

3. Cost-effectiveness: Digital transactions can be cheaper than cash transactions

because they eliminate the need for physical currency and associated expenses such as
printing, transportation, and security.

4. Privacy and security: Digital payment methods can enhance privacy and security by
allowing for more secure and traceable transactions. However, they can also raise
concerns about privacy breaches and cyber-attacks.

5. Security: Another advantage of going cashless is the increased security it provides.

Digital transactions can be more secure than carrying around cash, as there is less risk
of theft or loss.

6. Impact on cash-dependent sectors: Some sectors, such as informal and cash-

dependent businesses, may face challenges in transitioning to a cashless economy,
which could affect their livelihoods.

7. Dependence on technology: One potential drawback of a cashless economy is the

increased dependence on technology. If digital systems fail or are hacked, it could
lead to a breakdown in the economy.

8. Exclusion: Another potential issue is the risk of excluding people who may not have
access to the technology required for digital transactions, such as older people or
those in rural areas.

9. Impact on the informal sector: A cashless economy could also have an impact on
the informal sector, which relies heavily on cash transactions. It could be challenging
for small businesses and street vendors to adapt to a cashless economy.

10. Government policies: Government policies and regulations can play a crucial role in
the success or failure of a cashless economy. For example, incentives could be offered
to encourage people to adopt digital transactions.

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