An analysis of demonetization (8th november 2016) after two years- without any prejudice

The RBI act empowers the central government to demonetise any series of bank notes, but the government can take this decision only on the recommendation of RBI (the monetary authority of India). The government and RBI in consultation took the decision to demonetise 86 percent of India’s cash in circulation (500 and 1000 rupee bank notes) to tackle endemic corruption and counterfeits used by terrorist and other anti- social groups. Parallel economy could be named as black, unaccounted, illegal unsanctioned economy and its impact are loss of revenue to the state exchequer, consumption of non essential items, investments in unproductive channels like jewellery, bullion, real estate, luxury housing and transfer of funds from India through violation of foreign exchange rules and regulations is an outcome of corruption. The main objective of this paper is to examine the impact of this step exactly after two years, on Indian Economy through an analysis of secondary data. According to the annual report for 2017-18 of RBI, 99.3 percent of demonetised currency has come back to the banking system slightly more than one third of the total currency in circulation was in Demonetization greater than Rs. 500 at the end of March 2018, which is nearly the same as the corresponding values in March 2015 and 2016, the last two years before Demonetization. The share of currency in Demonetization greater than Rs. 500 has been more than halved in March 2018, compared to what it was in March 2016. This is basically the result of Rs. 2,000 notes replacing Rs. 1,000 notes. It means things have drastically changed in volume. The supply of currency both in value and volume terms has increased compared to what it was before Demonetization. India still does much worse compared to very small countries in Human Development Index. This paper has examined the overall impact.