What would be effect of 500 and 1000 Rs notes ban?

The ban on ₹500 and ₹1,000 notes, announced by the Indian government on November 8, 2016, had significant economic, social, and political impacts. Here are some of the key effects:

Economic Impacts

• Short-term Disruption: The immediate aftermath saw severe cash shortages, long queues at banks and ATMs, and disruptions in cash-based transactions. This led to a decline in economic growth for a couple of quarters12.
• Impact on Sectors: The agriculture and informal sectors, heavily reliant on cash, were particularly affected. Farmers faced difficulties in purchasing essential supplies, leading to a drop in agricultural output25.
• Digital Transactions: Despite initial chaos, the move spurred an increase in digital and cashless transactions, contributing to a more digitized economy25.
• Inflation: There was a potential decline in inflationary pressures due to reduced demand and household spending3.

Social Impacts

• Public Hardship: Many people, especially the poor and those without access to digital payment systems, suffered significantly. There were reports of deaths linked to the cash crisis25.
• Employment: An estimated 1.5 million jobs were lost due to the economic slowdown caused by demonetization2.

Political Impacts

• Government Perception: The move was seen as a bold step against corruption, though its effectiveness in reducing black money was questioned. It may have contributed to political realignments and public perception of the government's stance on corruption12.
• Elections: The BJP performed well in subsequent state elections, possibly benefiting from the perception of tackling corruption2.

Long-term Implications

• Financial Inclusion: The move led to an increase in bank accounts and financial literacy among previously unbanked populations1.
• Economic Slowdown: India experienced an economic slowdown in 2019, partly attributed to demonetization among other factors2.
• Digital Payments: The push towards digital payments has continued, though cash usage has also increased over time2.