In a retrospective analysis, India finds itself revisiting the tumultuous chapter of demonetisation, a controversial decision made by the government in 2016 that continues to have lasting effects on the nation. This move, aimed at combating corruption, black money, and counterfeit currency, brought about significant disruption to the economy and the lives of millions of citizens.
The sudden announcement by the Prime Minister at the time, Narendra Modi, on November 8, 2016, to demonetise u20b9500 and u20b91,000 currency notes sent shockwaves throughout the country. Overnight, these high-value banknotes ceased to be legal tender, prompting citizens to rush to banks and ATMs to exchange or deposit their cash.Source :- scroll.in
The immediate aftermath of demonetisation witnessed long queues outside banks and ATMs, as the cash shortage severely impacted daily transactions, businesses, and the informal sector, which primarily operates on cash. Small traders, farmers, and daily wage earners were hit the hardest, struggling to adapt to the sudden cash crunch.
Although the government aimed to unearth black money, eliminate counterfeit currency, and promote digital transactions, the move received mixed reviews from experts and the public alike. Critics argued that the decision was hasty, causing significant disruption to the economy and leading to a dent in India’s GDP growth. Proponents, on the other hand, maintained that it was a necessary step to curb corruption and bring the informal economy into the formal sector.
Now, nearly seven years later, the repercussions of demonetisation continue to reverberate. While some of the short-term impacts have subsided, the long-term consequences have been felt across various sectors. Several studies suggest that demonetisation failed to achieve its intended goals, with only a fraction of black money being recovered and little impact on curbing corruption.
The informal sector, which accounts for a significant portion of India’s workforce, still faces challenges in recovering from the blow. Many small businesses were forced to shut down, and job losses were reported in sectors like agriculture, construction, and textiles. Although digital transactions have witnessed a surge, cash-based transactions remain prevalent, highlighting the limitations in achieving a completely cashless economy.
Furthermore, experts argue that the abrupt demonetisation move damaged India’s financial credibility and eroded public trust in the banking system. The country’s banking sector had to undergo significant changes, with the introduction of stricter regulations and increased scrutiny. The introduction of the Goods and Services Tax (GST) in 2017 further compounded the challenges faced by businesses already grappling with demonetisation’s aftermath.
As India looks back on the effects of demonetisation, the debate surrounding its impact continues. While supporters emphasise the government’s intention to fight corruption and formalise the economy, critics point to the immense disruption caused without achieving the desired outcomes. The episode serves as a reminder of the complexities involved in implementing significant economic reforms and the importance of thoroughly evaluating potential repercussions before taking such drastic measures.
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