Introduction: Eight years ago, on November 8, 2016, Prime Minister Narendra Modi announced the demonetisation of Rs. 500 and Rs. 1000 currency notes, a move that aimed to combat black money, eliminate counterfeit currency, and curb terrorism. Now, as the nation reflects on the aftermath, the policy remains a topic of debate. Has demonetisation achieved its intended goals, or has it left India with new economic challenges?
Economic Indicators and Criticisms:
1. Cash in Circulation: One of demonetisation's primary objectives was to reduce cash dependence, but cash in circulation has surged from 17 lakh crore in 2016 to 33 lakh crore in 2023—an almost 100% increase, raising questions about the policy’s impact on promoting a cashless economy.
2. GDP Growth: India's GDP growth rate is currently estimated at 6.3% for 2023, which is about 2% lower than anticipated. Critics argue that the economic disruption caused by demonetisation contributed to this slowdown, particularly affecting small and informal businesses.
3. Unemployment Rates: The unemployment rate has reached 10.05%, reportedly the highest in recent history. This surge has been partially attributed to demonetisation's impact on cash-reliant sectors and small businesses.
4. Inflation Concerns: Inflation, as measured by the Consumer Price Index (CPI), stands at 7.44%. Many believe that the policy exacerbated inflationary pressures, impacting the purchasing power of common citizens.
5. Reported Deaths and Social Impact: During the implementation period, over 150 deaths were reported, as people struggled with cash shortages. The emotional toll on citizens further fuels criticism of the policy’s rushed execution.
6. Effectiveness Against Counterfeit Currency: According to the Reserve Bank of India, 99.3% of the demonetised notes were returned to the banking system, suggesting limited success in curbing black money and counterfeit currency.
7. Economic Losses: Estimates indicate a loss of around 3 lakh crore rupees in national income, with some attributing this to the economic shock induced by demonetisation.
Limited Impact on Terrorism and Corruption: Despite initial claims, demonetisation appears to have had minimal impact on reducing terrorism funding or corruption, as both issues persist at notable levels.
Conclusion: Eight years after demonetisation, the policy remains divisive. Supporters highlight strides in digital payments and financial inclusion, while critics argue that the economic costs far outweighed any potential benefits. As India continues to assess demonetisation's legacy, it’s clear that the debate over its efficacy and consequences will shape future economic policymaking.
