Image 2On November 8, 2016, Indian Prime Minister made a sudden (and so-called ‘shocking’ by Indian Press) announcement about stripping the INR 500 and INR 1000 currency notes of their legal tender status. Within minutes, every stakeholder, from common man to politicians, was on the move, some inundating bank ATMs, others criticizing the move in their news studios and yet others finding loopholes to save their stashed unaccounted money/ counterfeit notes. In the entire ruckus that followed the announcement, one party that gained the most was news channels, people tuned into news taking TRPs to skyrocketed levels.

Then was the discussion of how, when, where will this move make an impact, newspapers the next morning too were flooded with opinions and calculations. In the unsure atmosphere where no one had ample know-how to judge the influence of PM’s announcement, the irony was that everyone turned into an analyst, many economists invented new theories, politicians had their own reservations and the common man was on streets gossiping the aftereffects.

This is what that made this move a superhot topic on social media. The new currency note of 2000 denomination was modified impeccably to inject in it a Nano chip and to circulate messages that future hoarding will be caught via GPS! Until today, this milieu of uncertainty prevails; analysts are high on tone while trying to picture their theory as the most accurate, really?

In ensuing write-up, let’s take a little break from this sensational background and understand the basics of this move. I can guarantee that the real consequences of denotification of currency will be felt in an altogether different manner as explained by our wise journalists and panelists. Here are all questions answered.

Did the November 8 Announcement Amount to Demonetization?

In the curiosity to know, I looked for dictionary meaning of this word and I could notice that the Prime Minister’s decision was quasi-demonetization, not the kind of DEMONITIZATION as we find in newspapers and in prime time debates.

Demonetization saw the light of day when European countries adopted Euro as their currency and pulled back currencies of their respective economies. On the contrary, the Indian Rupee retains its legality, it is just that bill of denomination INR 500 and of INR 1000 is no longer valid to make transactions and they are to be replaced with newer versions.

There have been instances in the past when older versions of bank notes are replaced with newer versions with more security features added, hence using the term ‘demonetization’ in such wide and loud parlance doesn’t make much sense.

Why Did the Government Take This Decision, All of a Sudden?

Let me tell you that all those experts on televised debates are just producing conspiracy theories as were created after 9/11 or the disappearance of MH370. You can google ‘MH370 conspiracy theories’ or ‘9/11 conspiracy theories’, can feel embellished and bite your nails, but they won’t serve any productive purpose. Similar is the story when you listen to an economist or an eminent professor on prime time debate which ends in same unconvincing manner as did the coverage of 2008 Noida murder mystery.

Then should I serve you with some more spices? Rather, let us talk fundamentals and real. The government’s decision has come in the backdrop of excessive counterfeit Indian currency notes printed in Pakistan and their use in funding terror activities and unrest in Kashmir and other parts of India. It will also act as a blow on those who have stashed hard currency in their secret vaults as much of it will become nothing but useless pieces of paper. Third, idle assets will now turn into productive ones allowing banks to raise credit flow at lesser interest rates.

I can speak endlessly on this question, anyone can, but let’s just keep it simple yet authentic.

Is This a Blow to Common Citizens?

Queues outside bank branches and cash dispensing machines may have created new records; news channels term them ‘serpentine’, type serpentine on google, then click on news tab, and you will see amazing results. True, spending capacity of all has plummeted and commerce has seen a fall. Almost everyone is trying to rid herself of old currency notes and feel rich again by acquiring the new legal tender. Isn’t this a race, a self-created urgency? And who should be blamed? – The government for not preparing in advance, or we, who are limitlessly anxious, or banks’ managerial staff who weren’t ever equipped to cope with such occasions.

Accept it, even when a busy road is planned to be freed of traffic chaos by building a flyover, people are inconvenienced for a year or two. And after all, this is the nation in making; can’t we cooperate for some weeks? Is it the government that should have arranged for separate queues for senior citizens and disabled? Do we act in the same manner when an ambulance asks way on a busy road? Why can’t we allow genuine money seekers reach counters in lesser time?

Moreover, banks operate under leadership of their Boards which have distinguished personnel as directors. Did they not know that almost half of their ATMs are always out of order? What if there was a sudden rush of people seeking their money on a rumor that Indian banking system is about to collapse? Indeed, it is the top echelon at fault if branches and ATMs aren’t available to their customers in near vicinity, this is what they are paid for, planning.India Currency Overhaul

How Would the Indian Economy React to This?

I find this question the most challenging to answer. Had anyone been so brainy in predicting economic downtrends and uptrends, we would never have faced depressions and recessions. The same media that could not even say that Donald Trump ‘may win’, could even judge a Brexit vote, is yet again arguing the impact of denotification of currency notes on the overall economy. The irony is that these panelists and journalists are pro-something and anti-something, hence their arguments are framed likewise.

What I can say is that the economy will see a move toward a time where banks will have their pockets filled to extend credit to businesses on lesser rates. Once you deposit that cash in bank, no one would withdraw the 100 percent of it. Basel-III norms for capital adequacy and recapitalization of banks with weak balance sheets may also find answers in this. Second, with tax on higher-than-legitimate deposits, government’s purse to finance schemes of social importance and infrastructure development will see a new dawn. Government’s tax collection never belongs to MPs or MLAs, it is used to build the nation, do not forget this rudimentary fact.

Another myth created by media and self-styled experts on social media platforms is that any currency that does not see a bank vault since it was unaccounted and stashed illegally will wipe off wealth from the economy. I ask, is the Indian central bank unaware of the total amount in circulation in form of 500 and 1000 bills? Any currency note is the ultimate liability of RBI, with reduced liability, they will offer more dividend to the central government; reprinting of the amount of money that won’t make it to banks’ strong rooms is a simple way to bring back money in economy; this is done through Open Market Operations by buying government bonds, did you hear of this in any news channel debate?

Let us talk some more fundamentals. Inflation is backed by rise in demand and stagnation in supply. Inflation is directly related to demand this is basic economics and true. Now take an example. One of my friends’ wife is a yoga instructor and earns fee in cash for which she has never made any declaration to authorities. Now with that cash in hand, she plans vacations, gifts, high-end consumption and above all, wastage. This is just like a rich man, who has surplus cash in hand and he buys fruits for family consumption thus increasing their demand, hence prices and leaving few for lower middle class and poor, that too at unaffordable prices.

Such instances are quite common and they drive demand not proportionate to real and legitimate wages of common people who pay both direct and indirect taxes. With a decrease in the amount of cash with my friend’s wife and that rich man, their household’s spending capacity will decrease; markets will then correct themselves, thus bringing down demand and wastage, ultimately price. Now come to supply.

There is an assumption that with lessened demand, economic activity will dampen and job creation will take a hit. This is not true. When inflation would weaken, it will increase demand from genuine taxpayers due to price and market correction. The incentive for supply side to produce goods and services will remain, although their profit margins may squeeze a bit. Another surety is that when idle cash will turn into productive asset by being deposited in bank, banks will use this to increase credit flow in market. And this credit, at lower rate of interest, will flow to small scale industry, farmers besides corporate houses. In such situation, economic activity is bound to see an increase and job growth will see significant improvement.

How Should Implementing Agencies Act?

Even when we laud the brave step of ban on high denomination currency notes by the government, some flaws in scheme’s overall execution are noticeable; and these stem from bureaucracy and other implementing agencies, if not from the very top echelon including the Prime Minister and Finance Minister. It is also correct that these top policy makers brainstorm and devise plans, and as such they cannot be expected to spare time and labours to give directives on all ‘how to’ to banks and other stakeholders.

A few top heads thought of this bold step and did not involve many, or prepare well in advance to avoid any leaks and hints. But a foolproof plan of action the subsequent morning with elaborate directives to partners in implementation should have inevitably come. Chaos in banks with people queuing up in large numbers and no clear directives on how to manage such critical occasions (by guiding Chairpersons of banks to advise branch managers to arrange for separate queues for separate tasks, booking of time-slots to avoid wasting time, out-of-turn service of people in genuine urgency, restoration of dysfunctional ATMs and recalibration) was that leaves a stain on the entire implementation exercise.

Leading part had to come from banks and post offices, which in fact should not have waited for the government to issue instructions on trivial problems like managing crowds and easing the scene for vulnerable groups like disabled, senior citizens and those with real emergencies like need of cash for health related concerns, impending ceremonies and those without any ID proof. Bank staff had to be sensitized on the very first day. Backdoor conversions of family and friends have to end.

The most apt idea to make sure legality of exchanger and curb repeat exchange by same users was to just check a valid ID proof of seeker and use of indelible ink (a suggestion by me on 12 November that has lately been accepted on 15 November). Why did you, in first instance, want inks of photocopy machines to dry, even for paper trees are cut? Indelible ink would have cut short the queues very second day! This was an undeniable planning disaster.

Then are the state governments which must now come in support of the move and instruct respective departments like state highway toll authorities to either allow trucks carrying essential commodities pass without toll payments or facilitate online payments like the ‘Fastag’ service introduced on national highways. Also are public sector undertakings which should help their staff convert old bills from in-house treasury department and prevent them from thronging bank branches.

For the general public, it is time that seat belts are tightened, not for being the first one in the queue to change currency notes, but for getting ready for a new dawn. It will be time where transparency shall prevail, unaccounted money and benami assets will make it to government’s coffer, not individual pockets. As a proactive measure, make all your accounts, be it with banks, insurance and mutual fund companies or in G-secs or bank lockers, KYC-compliant to avoid any approaching trouble.

Let’s conclude

Agreed, farmers are facing a tough time in their peak sowing period. But do we not know that the primary worry for agrarian economy is lack of institutional credit and the menace of private moneylenders. How about the future where banks will have sufficient capital to lend them, backed by their own banking and transactional history? Pain for households where marriages are scheduled?- let’s find out. Was marriage not an occasion to showcase wealth in Indian scenario? Do marriages in developed countries (where we dream to immigrate) entail similar expenses and show of affluence? Bring some austerity dear Indians, it will help in the long-run!

The issue of a 2000 denomination note is undoubtedly the most controversial subject that is generating new conspiracy theories every minute. Texts are doing rounds on social media that say it was a pre-thought measure hinted well before November 8 to engage Pakistan in swelling its printing of old 500 and 1000 currency notes that were easy to replicate. Yet another theory is that the ruling party told its legislators of the November 8 announcement in advance and has introduced the new 2000 note to help them stash their unaccounted wealth! It is up to you which one to go for!

This entire episode is the latest in the series where 24×7 news channels have created an atmosphere of unfounded ruckus and imaginary brouhaha. The fact is that these round the clock channels need something (or should I say anything) to discuss, panelists die to offer contradiction on any move to showcase their acumen, and what could have been better than an incident that has a bearing on all Indians!

Stay relaxed, your hard-earned legitimate money isn’t going anywhere; yes, the hoarders need to worry. Stop blaming government for shortage of currency and long queues outside banks; blame either your anxiety or your banks who otherwise promise to be with you at any hour of need, in the real test, however, they failed to the core. A cashless, transparent and inclusive economy welcomes all in near future, let’s be a part of this revolution.

I will say that although prima facie pluses are eradication of black money and counterfeit currency, underlying advantages are many. Although we are the fastest growing economy, Index of Industrial Production, manufacturing and agrarian growth rate, employment creation, credit growth were and are either in red or near-stagnant. All these concerns must resolve to some extent, albeit assurance of double digit growth at this time may not be given, but still, the atmosphere will be conducive to both growth and equitable distribution of national wealth and income.

Image 4Lastly, let’s be thrilled on taking a ride toward a prospect where rich will lose at least 20-30 percent of their stashed wealth, which will flow to the poor in form of credit from banks and social spending by government, thus giving a decisive blow to decades of income disparity. This eroded wealth of the rich and future check on accumulation of illicit money will boost the zeal of legitimate taxpayers and the poor, a new India is about to be born.

And here is a huge salute of applaud for the bank staff that is working overtime to ensure citizens face nominal troublesomeness. For all those waiting patiently in queues, do not worry, this is your investment that will produce phenomenal returns.


  1. Harsh Makwana

    Entire India barring a few black money hoarders are happy with the decision of government. If there is inconvenience, then the outcome will be highly positive and awarding.

  2. Leo Jose

    Poor have lined up in front of banks and they are dying of food shortage and essential health services. Modi is the worst and most authoritative prime minister ever that India has had in its entire history.

  3. Krprateek Gandhi

    No pain can be bigger than a better and equal India that we are about to see under BJP rule. Opposition parties are faking public opinion which is favourable to the government.

  4. Nakul Bhardwaj

    I agree that this is a revolutionary and bold decision but yes there are faults in execution of scheme which is evident by watching news of stress that people are facing in queues.

  5. Bharat Shah

    One thing that is noticeable is that no minister or MP and MLA were seen exchanging their old currency. Did these people have enough cash to survive?

  6. Harshil GOYAL

    I am sure that the government will even change 100 and other lower currencies in some time because they know that people have converted high demomination notes into small ones.

  7. Abby gupta

    In the real world scenario, it can be observed that government was not fully prepared. Even private players like payment banks should have been included in the task of changing old 500 and 1000 notes.

  8. PARTim panday

    If Prime Minister was so serious about plugging loopholes for black marketeers then why they did not plug real estate loophole. I know many who have bought land with old currency.

  9. Sagar Premkumar

    India will become a cashless economy in near future where all transactions can be monitored hence no unnecessary and fraudulent money supply will happen. Inflation will be less as rich people will have less to spend.


    Great step towards eradicating black money from the market but also equally bad implementation and planning!!!

  11. Muthuswamy David Michael Rajkumar

    Very well explained for a lay man to finance, like me. I hope prices will come down to realistic levels, things become affordable, and peace and joy prevails for all of us – the common men:-) Kudos Dr. Sunil

  12. vijay sivadas

    This will not work out with all Plan A/B in place to overcome the disaster,Since this is a very SOLID move by our PM to boldly take this kind of decision ,Overnight.Yes the Common man is suffering that Includes me too.. but no one thinks that
    this is only for a short time.Later if the same PM comes out with a plan of reducing the TAX bracket for the working professionals then ???? So lets all wait for the days to come,Jaihind”

  13. Bhanu Prasad YB

    It’s test for reselience period !! After all we are getting financial freedom after 70- years !! If not freedom after 200 years !!

  14. Bhavin Joshi

    The move which has both long & short term benefits. We will know only in future how the PM was right about this move

  15. Md Akmal Shareef

    Only 33 death till now.. how many we want more to fulfill the dream of middle class of reform? Why conveniently silent on corruption of corporate and write off billions of loans?

  16. Rahul Sangakara

    Economy of India will only see a double digit growth and employment generation after this as banks will give more credit to industries and the same will increase output and supply.

  17. Sanjeev Kulkarni

    Well said Sunil. Not to forget (apart from the points that you listed), one of the byproducts of this whole exercise would be higher level of compliance in income tax payments, going forward

  18. Krishnan Kandadai

    Nicely articulated Dr.Sunil Gupta ! However with the introduction of New Rs 2000 and Rs 500 notes and later on New Rs 1000 notes people will once again accumulate unaccounted wealth in these currencies ! What are the disincentives that the government can think of to discourage this other than another sudden announcement of demonetization which may not happen any time in the near future

  19. Jeevanjot Kaur

    Reality is suffering for a common man, nothing more than that! Not a planned move for such a big developing and beautiful Country!!

  20. Dr Suresh Kumar Yadav

    Sir sometime we think why I have taken this initiative but bold step required. In this country whatever we have to good work but opposition mean contractorry. Even if we are wholly hearted then even we have to faced.

  21. V.V. Balaraman

    If this move does not settle down sooner or later for the benefit of the country, then no more reforms will be possible and clearly therefore , there will be no hope for the Indians for a better living country. For the time being let us be optimistic and live with hopes

  22. mathewabraham pallikal

    Good Shepherd Enters through Main Door but thief and robbers enter though some other way said our Lord GOD

  23. Prem Shekhar Prasad

    Still literacy level in India is lesser and very hard to convince all. We all are educated and able to understand best without any reliability on others. Change in Currency is the only method by which you can make terrorists ,Naxalites and Separatist in our country. This is the thing that happened in just a couple of days in Kashmir. Many innumerable students could go to attend exam. On surgical strike, terrorist group reacted braverly to India only on the strength of money power. Today they are powerless and I did not hear any reaction from them so far. Is it not a success? Even media of Pakistan started praising this step. Donot u think gr8 step? Ditch between Rich and poorer was there and now labelled to Rs,4500 to all. Donot u think Samajwad? I am surprised to hear a baseless reason like marriages etc. Marriages in India takes place with Ek chutki Sindoor , Simple thread of Mangal sutra etc.. Now hoarders still show bump that I had to reduce my budget for marriages . Real meaning is to last for ever. Glamourous show off in India is becoming a fashion and how media appreciate about bumpy and fashionable marriages which is already against our society. Media should ban all this. Today I personally feel that fighting terrorism

  24. Jebran khan

    Well planned structured money laundering was carried out by Modi before banning 500 and 1000 denomination currencies …
    Last year ( May 26 , 2015) RBI increased the slab for LRS “Liberalized remittence scheme” upto USD 250,0000 which means an individual from India can transfer upto two crore rupee to their overseas account in a financial year ..
    Before modi come into the power the LRS limit was just 75,000 USD. He was elected as prime minister on 26 May 2014, RBI Increased the LRS slab to 125,000 in very next month Modi come into the power I.e Jun 03 2014 and also they increased the slab to 250,000 USD second time on May 26 2015.

    Due to this increase in LRS slab, there was a sudden spurt in remittence since June 2015. Approximately 4.6 billion USD (30,000 Crore rupees) has been transferred from India in last 11 months. This sudden spike in remittance almost 300% higher than historical average remittance. There is no clear explanation from RBI for this sudden surge.

  25. Gosakan Narayanan

    Put a free SIM card from Reliance to the market and everyone is more than willing to Q up. Get real, this is a move that has bought light to the common man. Fiscal decisions take time to prove their worth. This, as mentioned in the article is not a pure drive of demonetisation, it’s a pull back on notes widely misused and wether it creates a phenomenon, it sure did create a dent to the grey economy. Banks on the other hand are least equipped for an emergency service to public. Is this move just an issue of long queues or is it beyond a factor of bringing novelty to the Indian Rupee. Modi has not belittled the nation like the opposition has by taking to the streets to oppose this. Why are they opposing it? Because it has caused inconvenience to the common man. Fire from the common man’s shoulder seems to be a good motto for the opposition. Give it time, this will react and let’s see if it is a positive change. Definitely is not a negative change, the impact of the move cannot be determined at this stage. Maybe it isn’t going to deliver what was envisioned but it definitely did take the fakes out of the market.

  26. Dr.V.Rajendra Prasad

    How many times can a person go into these long queues in a day? Max 3-4 & exch 4K each.Indelible ink for Rs-4000! Means u can’t cash for weeks thereafter? This is currency rationing. Tughlaqi states do this, not Kautilyan ones


    Dear Sunil ji,
    Appreciate your view on contributions of media to mar a situation (don’t know if thats the only way to solve struggle for existence)
    Request you to please present some stats / view points on,
    1) how much % is tax paying segment and how much is their contribution to total revenue inflow to GOI.
    2) how much is the % small and medium sized businesses and their contribution to rev inflow of GOI.
    3) out of the sized SME’s, how many do really pay taxes. Be it a community specific.
    4) out of the tax paying employee segment, how much % would be having income through sources like agriculture (un taxed, income source)

  28. Siddhartha Verma

    There are only TWO options now …..1 ] Support and try to maintain peace and harmony or 2] Criticize, create panic and havoc, spoil the ambiance of country……CHOICE IS OURS! I might get rude seeing a lot of people opting for option 2nd!

  29. Mahalingam Ponnusamy

    Purpose of Demonetization (Quasi-Demonetization):

    1) To remove counterfeit Indian currency notes from circulation
    2) Black Money in the form of cash (which seems to be very little), mostly in the form of investments within India or outside India
    3) To bring more money into legal circulation so inflation, Interest rates reduce

    The Quasi-demonetization plan is OLD, but implementing it overnight is NEW
    If point number 3 above really happens, then yes, it is worth the trouble

  30. Aravind Krishnaswamy

    Nice article and well articulated. There is no guarantee that black money will get erased from the system unless it is regulated going forward.

  31. Tanvi Bangur

    Very very well written. While all of us are in support of the decision, it is also true that it should have been implemented in a better way.

  32. Mr Sandeshkumar Kumar

    It is one of the toughest decision taken by PM Modi. There will be complications for few weeks but days after this will bring great boost to economy and new technologies

  33. Anurag .S

    Dr. Sunil Gupta A very unbiased article written. Keep the good work, can you please throw some light on the GDP/Inflation portion mentioned in your article. let alone the political/social repercussions.

  34. Rohit Dalmia

    The parallel economy has grown to an unexpected level since the beginning of the coalition era. This demonetization move will surely shrink the parallel economy. If India would have been digitized (including data integration) in a better way before making such a move, then things would have been a lot different in real terms. The problems faced at the ground level by so many people could have been reduced to a huge extent. I hope that fake currency does not come into circulation again

  35. Dinesh Belsare

    Its a really big move made by honorable PM. I appreciate his decision and the work he is doing restlessly. were there no poor when 2G scam and other scams happened. What government is taking from Poor. Poor’s are just in trouble for being in line for hours and getting their money that’s it. are Poor’s not getting money are their money is wasted… Don’t understand the double standard of people. I am with Governement and their decision… Jay Hind

  36. Nijil nj

    Some of the merits that are unquestionable
    1. Pakistan’s fake currency printing gets Halted
    2. Terrorists run out of fund (they hold liquid cash )
    3. Maybe Biggest black money holders not effected but millions o small ones are
    that counts !

  37. Ramesh Bamidipati

    One has to understand that change starts from the “top”, from that perspective, Modi was spot on, in this action. Also, in order to spur change, there ought to be pain in any process, otherwise there is no innovation or a new way charted through such disruption. The idea is to not to follow this “cash based” economy and push the change to the common man into a more banking based one.

  38. Taha Mukarram Sheriff

    Brilliantly summarised in the perspective of justification of the Move. Euphoric imagination of the ubfurling of a bright tomorrow. Repeayed rhetoric of abolotion of black money and corruption. Can somebody explain the perspective from an economist ppint of view about the pros and cons cause and effect and the revival time. We are also keen to be a part of Ujaval and Swatch Bharat.
    Straighr from the heart and mind of a simple Indian

  39. Ravendra Tripathi

    This very good taken decision against corruption But Dear all India people I’m humble request Please !!Support for new born nation

  40. Sushma Sharma

    I really hope n wish that Modi’s vision comes true in India’s benefit…I fully n wholeheartedly support him.
    But writing off Vijay Malya’s loan by SBI…??Why?? This man lived life like a king on loan money now again enjoying waive off….!! On whom will this burden eventually fall ?

  41. M. Ashfaque Hussain

    Dear RBI and PM,

    There are very simple ways to do it, Why have you made complicated that 130 crores people are suffering ? You do not care them now or you have ego that you are best ? Please call us in your advirory board and there are thousands of simpler ways.

    It could have done this 9 ways –

    1. First print Rs 2, Rs 5, Rs 10, Rs 20, Rs 50 , Rs 100 and Rs 2000 and distributed in all cities in banks.

    2. Declare old Rs 1000 and Rs 500 as invalid across all regions.

    3. Monitored all cash transactions across all regions, tracked suspicious accounts deposits, launched invitation calls to all confirmed transactions reported by banks to discuss and furnish income source details with taxes planned to pay or already paid.

    4. Allowed people to pay tax by cash and deposit money in bank.

    5. No harassment to any one and no long ques to wait by any one.

    6. Money deposited by old notes sent to reserve bank of India by all banks after replacing with new notes.

    7. Destroy old invalid notes of Rs 500 and Rs 1000 denominations.

    8. Advised IT officials to encourage fair play to all but be strict against black money hoarding.

    9. Tracked all gold, property , other currency conversions , asset or business transaction where tax is low

  42. Samir Mukherjee

    come forward and streamline the cash crunch.. definitely this action is bite on corruption and now we can see who are under the blessing of corruption, who are too much irritated are sitting over black money..

  43. Capt Jatinder Kaur Dhillon (Retd)

    Execution of the whole process could have been streamlined…there is definitely an impact on the common man. Who has genuine income….and now people loosing lives. But as us in queues we can give way to the old and weak….we also have some responsibility…we just want the bank staff and PM to clean up the mess…just like swatch bharath abhiyaan…we all applaud but have we changed our mindset to make our country clean….this is a cleaning drive let’s participate when it’s been given to us…let’s play our part…the corrupt politicians and people will be anti this drive…let’s support PM on this drive

  44. Anilkumar Bedre

    it’s Good for Nation, but look like refreshments for corrupt personnality without non financial punishment and warning

  45. Rajnish Manchanda

    This actually not the final step to remove black money but just the first step. It will impact black money generation to some extent. The black money and parallel economy are big problem of such extent that we cannot even imagine. That is why small steps taken (such as demonetizing 500&1000notes) may seem big ones but it just the beginning of treatment to cure such diseases. Their will certainly be further steps taken to remove black money and parallel economy completely out of our system. Till then we have to bear such consequences. This happened in US too after great depression, people bore tough consequences for tough decision taken at that time to come out of GD and the result is evident today

  46. Omkar Lamba

    Awesome move by our honorable PM ji.
    No doubt about it. We would certainly see a lot of plummeting in various resources, like oil/gases, bank interest rates for loans etc..
    But the only thing that is poking right now is the wrong management done for this move.
    Seems like, the jury didn’t do a nice homework. As we can see the people suffering, that too only the people who happens to have white money !
    Rest with black money, burnt the money!!!

  47. Damodar Pattath

    It is easy to pass critical comments same thing happened when licence raj was being replaced at the time of Former PM Narasimha rao.or when DOt was being revamped during PM Rajiv Gandhis time.
    At that time also there were issues.
    during those times common man was oblivious on many fronts. Let us wait and at the end of the mandatory period we can assess whether this is effective and result oriented. treatment has just begun so why we should jump on to the negative progonosis.
    let us also hope and believe that this will improve the common man in the long run.

  48. Venugopal K Pillai

    Black Money is like cancer and there will be a great improvement in the economy after cleaning such black money , middle class people will get advantage of that. PM doing his best for us. A great decision maker

  49. Michael Lewis

    it reminds you of 08 in America, the staged crash to destabilize the middle class futures. .very good for a caste system

  50. Shweta Babbar Sharma

    Brilliant Article. Very well written. I am glad that people like you still exist. Nation is changing PLEASE Co-operate everyone

  51. Arunkumar Valluri

    still doesn’t explain how black money will be erased, govt creates panic by PM’s own utterances that paper is thrash and you put the blame on people for queuing up. This article just doesn’t cut ice

  52. Prakash Shende

    Banks who have created such a large amount of NPA will generate still higher NPA since more money at less cost is available to them !!! There is no action against the person or bank who are responsible for NPA so do we come back to zero or go negative ??

  53. Kiran Garag

    My view is, the Rs1000 notes could have been replaced with a new Rs1000 note first. Once the dust has settled then the similar exercise could have been done with Rs500 Notes still maintaining the surprise factor

  54. Kiran Garag

    This October surprise was a very good and bold decision by our Hon’ble Prime Minister and all kudos for the same. As you rightly said in your article the law makers cannot think of all the implications and impacts before hand and there are bound to be unplanned impacts to the economy. I strongly believe the intention of this decision was patriotic and I fully support the same.

    I was just looking for few clarifications which I strongly believe may be found with time.

    1) Income tax department data says only 6% black money is in form of cash and this so called demonetization is only addressing 6% which will now further go down and the form of forex; gold; assets etc. would increase. So did we actually attack the root cause or is there a next surprise coming?

    2) This so called demonetization will solve the stacked old currency (black money) to great extent, which was actually longing for oxygen or fresh air , but will get back into its safes this time room for more money in the form of Rs2000 notes

  55. Md Akmal Shareef

    Where 90% black money is lying Modi and other political parties take political donation to wipe out their crime and by doing this kind of gimmicks he is making public fool?


    Dear Dr.Gupta, while I support the Hon’ble PM’s move in totality and appreciate your piece largely, a few observations from my side to a few points reflected in your article:

    – The idea of indelible ink is not going to be a major success here as people know how to remove it. (On a lighter note, I did not know this until someone told me a few minutes back).

    -Regarding marriages, even those who could never afford The affluent marriages suffered majorly. Pls do not forget that health services have suffered The major blow here..

  57. Divitha Somaiah

    It is surprising, that politicians are worried about common and poor people now. But nobody is asking, why still majority of Indian citizens

  58. Srikant Patnaik

    good job by pm but Rbi and banking system worst performance. still now the banking system not able to meet the expectations of the public. it’s time to bring in Army to speed up the liquidity crisis, these banking people are so lethargic, people can’t be taken for granted for weeks with out cash

  59. Sathya Kumar

    If PM Modi fails in his fight against corruption and black money, no PM of India will have the guts or courage to take this issue again on his agenda for next 100 years and corrupt politicians, beaurocrates, police, criminals and businessman will keep looting this country as their birth right so it is the duty of every responsible citizen to stand in support of PM Modi and fail the evil design of corrupt people to incite violence and create anarchy.
    If we fail to do our duty today, our children and grandchildren will never forgive us will hold us responsible for not giving them a clean India.

  60. Chuck Lohn

    I would think that India would be about the worst place to implement such a plan because so many street vendors only take cash. In my opinion the cashless moves around the world are pretty scary

  61. Thulasiram Thota

    Wow.Self-created urgency!! Are you serious!! People are dying due to lack of cash at hand and you are blaming people for this.I cant believe this.Co-operate for few weeks!! Isn’t this whole exercise ill-planned or in-efficient? Move is noble but, the implementation is pathetic. Think of people from rural areas going to banks to their mandals to withdraw and exchange money for their daily basic needs.You and me wont suffer as we are convenient in using internet and electronic money.People from rural areas where you dont have banks are the ones who are suffering the most.

    And do you really think black money is stacked in cash bundles under their beds or toilets as they show in movies.I don’t think so.They would have invested in real estate,gold and other means to stash it away.Otherwise word ‘Benami’ wouldn’t have come into existence.

    Releasing Rs.2000 note is the counter productive move which is a short term solution to quench the thirst of the cash starved country.Black money will be stashed away again with the new note if they want to accumulate cash and it has become more easy.Counterfeiting happens again.

    Govt. should have executed this noble move well.No one from elite group of policy makers thought through basic FAQ’s of common person.

    ATMs are not calibrated to distribute new notes.As per the official data it takes 2-3 weeks.
    No money at banks to distribute enough.No one accepting old notes.
    How do you get change for a Rs.2000 note even if you are through those serpentine queues when there is no cash in the market.
    Cant use it for your daily needs but,take a selfie or two and post it on social media.
    Though these are short term struggles but are basic things which need to be considered while implementing such a historic move.

    I agree that counterfeits have become mere paper.
    More will come into tax bracket if they continue to impose cash transaction restrictions only.
    Real estate will become cheaper and affordable to common person.
    Inflation will reduce in the long term as more money flow into banks and govt. will have more money as tax.
    Loan/FD interests will reduce as banks have surplus cash.

    I am not against this move and I appreciate it.But, I am only criticizing the execution of it.
    Please don’t blame people for the so-called race as they are scared and are in dire need of cash for daily basic needs.

  62. Ashok Makhija

    Nice article. Here, is another question where millions of good Indians living abroad are concerned and asking. Q. We have been supporting and helping Indian economy. However, millions have small amounts of Indian Rs. So that when we travel to India, we have for just enough to take care of immediate expenses before running to Bank or when banks just may be closed, ATM not working. How can we convert our legal what money while abroad?
    GOI Should provide reasonable answer and solve this major issue.

  63. pradip das

    well described.the only doubt is if 6% of black money is in shape of high valued currency and rest is in shape of real estate benami transaction,gold and forex apart from slashing money in foreign countries,how the govt plans to find it out

  64. Puralasetti Chandra Sekhar Rao

    100% good work done, only thing is Banks are working slow in changing the ATM machines, due to which few times normal people facing problems, but then also normal people are accepted and welcomed…Demonetization..

  65. Lakshminarayanan Gopalan

    Sensible article. I believe it should bring down inflation heavily.The cheapest beverage outside is a cup of tea and had sky rocketed from Rs.2.50 per cup in 2004 to Rs.7 in 2013.We can imagine for all others.In the name of growth,only price has grown not the real value for money.This move ideally should bring down money supply and stabilize prices in the long run

  66. Sudhir Dyapa

    Demonetization is a very good move to discourage people from hoarding money. Alternatives like e-commerce, innovations should be encouraged. It should be part of every ones daily life rather than situation based or single individual driven philosophy. Keep up the good work


    I must compliment the author who has come out with almost independent thoughts and painted a correct picture without prejudice and bias. Its well thought n detailed article depicting various relevant aspects of two types of note ban progressively. The Policy and idea sounds very well only execution part which could have been better planned by Bankers and other agencies on 9th Nov. when banks were closed. I am hopeful the situation will ease out in time to come. The panic could have been avoided but its the media and vested interest political parties created more mess rather than be part of this great initiative. The so called opposition parties have lately gone for their interest in upcoming elections and therefore wanted a mileage out of this situation.
    The time will show the benefits with couple of other initiatives which are in offing to take off against black money and corruption.

  68. Gajanan Sapre

    Crocodile tears for the public at large by whom everybody knows.why specify?No chip in the new note.but uparwala sab ko dekh raha hai.

  69. KL Rajpal

    The timing of the move just before the elections, the primary motive of the government may not be what is claimed and also explains the over 70 deaths of elderly citizens due to lack of proper planning and, not having printed even a reasonable fraction of the new currency to replace without much delay the 86% of the old overnight de-notified notes. If the problems of ATM machines which work 24 hours were foreseen, it would have greatly minimized the pain

  70. siddhartha Deka

    Why Modi government did not introduce a cashless economy in a phased manner other than demonetization in one second?

  71. Vasudevan P. Nambisan

    I am all praise for Respected Narendra Modi. There is no other Indian leader better than him. We have seen 60 years of ruling. Now in such a short time people want to criticise Mr. Modi! Be patient. Mr. Modi is the most able leader. He is here not for power, position or money. We have seen leaders who really made themselves rich. Any exception? Yes, Dr. Manmohan Singh has a clean image, but results have been poor. I earnestly look for an iron man like Sardar Patel . I see the strength of Mr. Patel in Mr. Mod

  72. Rama Krishna


  73. Vinay Shrimali

    Best rime minister for present & future to tackle issues with determinations & within a time frame… best of luck Honorable prime minister….jaihind

  74. rahul merchant

    Ill Planned move and no black money hoarder, terrorist or a corrupt person will keep his major portion in hard cash. PM must have known the conditions of bank working disorders, inadequate stock of currency, conditions of not working atms, attitude and laziness of staff of PSU n Pvt banks. He also must be aware about the short term impact on local economy and global ratings He must have been aware of FII view on short n medium term impact on economy. shouldn’t replacing in a well mannered way or allowing the old tender to continue till new notes enter smoothly. Many government officers are asking in lower denomination or in new currency to clear files. I’m sure PM would have thought about the black marketing. this can continue in writing lines n lines. a well planned move with honest intention would have been welcomed. but you won’t deny that there have been leaks as many pictures have circulated in social media. sorry but got to end here as I need to go on an ATM search


    If ROI is revised for declaring more income ay 15-16 and AY 16-17.
    will it be accepted?
    on line it shows roi processed.

  76. Bcv raju

    In the days ahead tough tasks by economists in addressing the unaccounted wealth pumped over 50 years that had inflated prices , salaries ,bullion markets, land house properties etc shall bring night mares to the good job done

  77. Madhavan Vasudevan

    Sir, your analysis is a fair view. Sure the educated elites who genuienly seek the welfare of this nation and not prejudiced will support this initiative, i am afraid about those common people. An opportunity for youth and NGO to propagate how this could be help us to build a strong future will be ideal and it will help the country to understand why decision is more from importany from national security angle.


    Mr. Modi, You are the Great Man in the Helm of Prime Ministerial Positions & in the Indian Politics since Independence.
    I wish you all the Successes and I salute you

  79. Nilesh Pakale

    much needed timely decision; sure will be backed by other measures in due course
    let’s contribute by supporting….

  80. K D Sharma

    Good! But how it will stop generating black money in future.. where most of daily transactions are in cash and no one willing to accept online

  81. Srinivas Varanasi

    Srinivas VaranasiIf Modi fails in his fight againt corruption and black money, no PM of India will have the courage to take this issue again on his agenda for next 100 years and corrupt politicians, beaurocrates, police, criminals and businessman will keep looting this country as their birth right so it is the duty of every resposible citizen to stand in support of PM Modi and fail the evil design of corrupt people to incite violence and create anarchy.

    If we fail to do our duty today, our children and grandchildren will never forgive us will hold us responsible for not giving them a clean Iñdia.( source Friends for ever )

  82. Vijay Michael

    This is one of few articles on this subject with a balanced view. Much appreciate the authors knowledge of macro economics and ability to think without bias or prejudice

  83. Vasudeva M Nayak

    Dr. Sunil,
    Thanks for this good note. People are so selfish, very poor patriotism in India. We have to support this bold move of PM

  84. Shyam Sunder Rai

    For people against the move: Any effort is considered a failure in the book of people. What did you expect, in a country where corruption, rotted culture is getting embedded in the genes of people, how else would you or any other political party have implemented “WITHOUT ANY SIDE EFFECTS” … you tell me that and I will make efforts to raise petition. Suffering is part of change, not just in India but everywhere in the world.

    Trend in India is not changing with regards to people trying save as much as they can to avoid paying taxes, by make cash transactions. Small Retail store owners like to transact in cash, small business owners also do the same. Ask yourself, why do you really need so much cash. Our taxis, transportation systems, retail businesses all want to avoid paying taxes, since their and your revenue is being impacted you are feeling restless and probably too lazy to transition through this plain, you are probably defaming the good governance which has started happening after 65 years.

    Please read reviews from people who belong to other countries, as our opinions are always biased based on any inconvenience we face. See what they say about the PM and his decisions

  85. Sanjay Paranjpe

    Listen to Anil Bokil’s speeches on You Tube and see why demonetisation was necessary.He is the brain behind Modi’s demonetisation.
    Those opposing demonetisation are really opposing India becoming great.

  86. Sriharsha Hoysala

    Just as cashless hospitalization has become very big in the last decade with the advent of private insurance companies, some external force is required to drive cashless transactions in retail sector.

  87. Reyaz Bari

    It is great move, well I appreciate it.
    There are something too that we should think without being biased to any political parties.
    It is a great blow to black money holders but do black money holders keep money of crores in cash with them or overseas bank?
    All 500 & 1000 rs notes which once hold value is now just a bit of scrap paper… i.e. trillions of value is just scrapped how this is going to rise economy?
    If you say that it is replaced by new printed notes then my dear it’s just increase in cost of govt without any profit.
    If one has black money then they are not fool to deposit that money in bank. If the black money holders have cash with them then they will burn or find new way to overcome it instead of going to bank and say that i have black money take it.
    Already within a day of announcement maximum money were converted to gold.
    How is black money going to come back in govt. account? No way.
    This step could have been benefited only with different strategies.
    This implementation has no good strategy, no benefits economically other than politically, only noise in empty bottle and pain to every middle class and poor people who don’t have credit card or any technology to buy daily needs and food

  88. Sachin Ranjalkar

    it can not be planned.. it’s just has to implement to abolish the back money market.. or the black money stock holders will have scope and time to get it converted to white.. Common has to face it.. when our soldiers at border can face the warmth to keep us safe then we must take up this and is very minor ..Cheers

  89. Sushil Kumar

    Thanks for sharing and making us understand the pros and con’s of the bold step taken by our present government.

    True it will not bring all black money fortnight but will create havoc among hoarders and common people will definitely herd towards banking system and online payment. Today transactions can be easily made through various e wallet like paytm and ola money etc. the only thing is people have to bring this into habit to get rid of menance of black money.

  90. Kalpana Naghnoor

    Unbanked money does many things, but primarily it reduces the volume of money with the government and it creates unrealistic prices.
    We must remember not all unbanked money is black-money, but it still causes unrealistic prices.
    Just this demonetizing isn’t going to resolve the re-creation of black-money. This may reduce terror funding, which is important to act against, there is urgency there. We need a better system in place to reduce re-creation of black money.
    The step is good, but it appears, somehow less democratic and more autocratic in its implementation, it’s only an observation, not condemnation on my part. The banks, I take my hats off to them, they have come through.
    But predictions are hard to make, because we cannot know how the people of this country are going to cope being cashless, and how adept are they going to be with the plastic. The banking systems are not entirely pervasive yet, and cannot process distress small loans as does an unlicensed money lenders, whom the Indian populace has grown to trust and lose its assets to, yet has emotional bondage to them.
    Lastly the enormous funds that will be with the government, after this move, should not be used to promote populist and torpid social programmes, government investment barring health, should be return based investment in its people.

  91. Praful Baweja

    my 3 points are simple

    1) Income tax department data says only 6% black money is in form of cash; 94% is in form of forex; gold; assets etc.
    2) this information coupled with 1.14 lakh crores worth of debt to top Corporates from 2014 till now makes this move questionable
    3) Capping on my own withdrawal of funds from my own accounts which are linked to PAN and aadhaar (thereby to my tax history) is totally violation of my basic rights as an indian citizen

  92. Jalpan Upadhyay

    According to NIA, RAW & IB report.. approx 400 crores fake currency was circulated in Indian market. Report is from 2012 to 2015.. now think the impact on economy. It was not sudden move but well planned. There is a problem is execution but it is not So MUCH as media is saying

  93. Ais Nair

    Demonetization of currency was a wise and bold step taken by the GOI to check inflation and b/m but common people should not suffer for currency crunch. The supply should match with the demand and queue system is not appreciable


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