What do you think of the decision by the Indian Government to demonetize 500 and 1000 rupee notes?

The decision by the Indian Government to demonetize the 500 and 1000 rupee notes in 2016 was a highly controversial and complex economic policy. Here are some key points to consider:

Objectives

• Curbing Black Money and Counterfeit Currency: The primary goal was to reduce black money, which includes untaxed income, and counterfeit currency, which was believed to fund illegal activities and terrorism13.
• Promoting Digital Transactions: Another objective was to encourage a shift towards a cashless economy, thereby increasing financial inclusion and reducing cash-based transactions3.

Outcomes

• Economic Disruption: The move led to significant economic disruption, including cash shortages, long queues at banks, and a substantial impact on small businesses and informal sectors23.
• Limited Success in Reducing Black Money: Despite the effort, nearly 99.3% of the demonetized notes were deposited back into the banking system, suggesting that the strategy did not effectively remove black money from circulation3.
• Increase in Digital Transactions: There was a notable increase in digital and cashless transactions following the demonetization3.

Criticisms and Reactions

• Economic Impact: Many economists criticized the move for its negative impact on GDP growth and employment, with estimates suggesting the loss of about 1.5 million jobs3.
• Execution: The execution was widely criticized for being poorly planned and causing hardship to the common people, especially in rural areas3.
• Mixed Reactions: While some industrialists and politicians supported the move as a bold step against corruption, others saw it as a flawed strategy that did not achieve its intended goals3.

Overall, while the intention behind demonetization was to tackle corruption and promote digitalization, the execution and outcomes were marred by significant economic disruption and limited success in achieving its primary objectives.