Does Demonetisation in India Achieve its Objectives?

Azeez N.P. Abdul ()
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Azeez N.P. Abdul: Department of Economics, Aligarh Muslim University, India

Economic and Regional Studies / Studia Ekonomiczne i Regionalne, 2022, vol. 15, issue 3, 336-350

Abstract: Subject and purpose of work: T he d emonetisation e xercise i n I ndia a imed t o t ackle t he problems of black money, fake currency, corruption, and terror funding. The drying-up of cash due to demonetisation initially led to a significant increase in digital payment methods. However, large underprivileged informal Indians still prefer cash for their daily needs. The restoration of currency in circulation and increasing cash–to–GDP ratio in the following years questioned the success of digitalisation. Demonetisation has been noted to increase the tax base, tax collection and taxpayers. But this does not compensate for the negative impacts of demonetisation on the economy. Therefore, this paper tries to answer the question whether all of the stated goals will be achieved. Materials and methods: For the purpose of analysis, secondary data were drawn from the Reserve Bank of India (RBI), National Crime Records Bureau (NCRB) and Central Board of Direct Taxes (CBDT). Results: The study found that, except in certain areas, demonetisation has failed to achieve its claimed key objectives. Only minimal short-term gains have resulted from demonetisation and at the same time, it wreaked havoc and harmed the economy. Conclusions: The efficiency of demonetisation as a strategy for combating black money is still up for dispute. If the government had done its homework before executing demonetisation, all of the mayhem could have been avoided. It was a badly thought-out, poorly planned, poorly implemented, and disastrously executed.

Keywords: demonetisation; counterfeit currency; black money; digitalisation; cash-to- GDP ratio (search for similar items in EconPapers)
JEL-codes: E12 E42 G10 G33 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecoreg:v:15:y:2022:i:3:p:336-350:n:3

DOI: 10.2478/ers-2022-0023

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