Demonetisation: 1978, the Present and the Aftermath

This is the title of a new EPW paper  by J Dennis Rajakumar S L Shetty of EPW Research Foundation, Mumbai.

Sudden demonetisation of ₹500 and ₹1,0000 notes, an elimination of existing money stock that enables economic transactions, is bound to have an economic impact, apart from penalising those who hold this money as store of their tax-evaded illegal wealth. Considering various possible scenarios, a loss of gross domestic product will be inevitable. 

Whether demonetisation this time will achieve its stated purpose can be understood only when more statistics become available. The extent of demonetised high denomination currency that finally fails to be exchanged for new notes or be deposited in banks will be an important indicator.

There are some interesting trends and analysis here.

 

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