Demonetisation was one of the most notable events in the Indian economy. It was condemned by some economists while many called it a master stroke. On 8th November 2016, the Prime Minister of India Mr. Narendra Modi announced demonetisation all over the country. The movement was initiated with a positive outlook to retrieve hidden assets from corrupt officials. Demonetisation resulted in the revocation of Rs 500 and Rs 1000 bank notes across the country.
Due to the sudden implementation, the people of the country had to face grave consequences like standing in long ATM and bank queues to get their valid currency. It was the first time when people supported a cause at such magnitude. With the entire countries cash businesses came to a halt and this affected GDP of the country. The new banks notes were issued in the denomination of Rs 2000 fueling the cash flow in the economy.
To facilitate smooth transactions, the government decided to permit unlimited digital transactions. This is what made demonetisation a masterstroke, because it provided a boost to digital transactions. Keeping a track of the cash circulation became easy for the government. To engage people in using electronic payment apps like PayTM, Airtel money and BHIM gained traction. At first people did have a hard time maintaining these virtual wallets, but as days passed people in the metropolitan cities adhered to the electronic payments system.
After six months of struggle, citizens of the country returned back to their normal routine, but their way of handling money had changed. Digital transactions gained momentum and people reduced the usage of paper money. People everywhere were scanning barcodes for payments, there was a sudden rise in the number of savings accounts opened that year. Banks reported the increase in the number of e-transactions via ATMs and web portals.
Though economy faltered for that fiscal year, demonetisation reformed India as a nation. Financial experts believe, demonetisation should have been planned strategically before implementation which is one of the reasons the movement was not able to achieve its true motive, but if we look at the bright side, we have succeeded in promoting the use of virtual money and digital accounts.