Impact of demonetization on the indian economy

Impact of demonetization on the indian economy

Author: 
Dr. Kusuma, A. and Prof. Sivasankar, P.R.
Abstract: 

Demonetization announced on November 8, 2016 was aimed at dealing with corruption, black money, counterfeit currency and terror financing. Although demonetization holds enormous potential benefits in the medium to long-term, given the scale of operation, it was expected to cause temporary disruption in economic activity. Therefore, it is imperative to evaluate the short run and medium-term impacts that such a shock is expected to have on the economy. Further, the impact of such a move would vary depending on the extent to which the government decides to demonetize. This paper elucidates the impact of such a move on the availability of credit, spending, and level of activity and government finances. Overall economic activities will be dampened in the short term. But the immeasurable benefits of having more transparency and reduced volume of black money activities can be pointed as long term benefits. It is clear that as of now, we are yet to come to grips with Demonetization and it would be prudent to say that unless there is more investigation into what the measure achieved or did not achieve. It would be best to say that structural reforms such as Demonetization often take time and clear thought as well as flawless execution before they begin to bear fruit. This means that we should wait until 2019 to see if demonetization succeeded or failed and considering the peoples’ opinion in the coming elections over the next couple of years.

Paper No: 
1856