Tomorrow, November 8 is marking the completion of four years of the announcement of demonetisation of all ₹500 and ₹1,000 banknotes by the Government of India. It was on 8 November 2016, the Prime Minister of India, Mr. Narendra Modi has revealed the huge step to the Indian citizens. He has also announced the issuance of new ₹500 and ₹2,000 banknotes in exchange for the demonetised banknotes.
The long four years witnessed several changes in economical sector, both ups and downs. When 86% of all currency notes were withdrawn from the market in 2016 without any warning, it was a ‘big shock for the average Indian citizen’. The less speedy printing of new notes also led to the thrashing of market transactions. The Former chief economic adviser Arvind Subramanian called demonetization as a “massive, draconian, monetary shock” in his book Of Counsel: The Challenges of the Modi-Jaitley Economy.
But the statistics ministry’s estimate for 2016-17 shows growth in the year of demonetization, from 7.1% to 8.2%. According to data by the Reserve Bank of India, more than 7.6 lakh fake notes were detected in the banking system in 2016-17 b6 the government. It was about 5.2 lakh in 2017-18 and 3.17 lakh in 2018-19. People were unable to spend liquid cash freely.
The greatest change came after this demonetization was the growth of digital payments market. Even though, demonetization began as a way to curb the black money later it became a means of making India cashless and giving digital India a boost.
Since demonetisation, the digital payment sector grew 55% with many multinational companies launched payment platforms in India. Google Pay, Pautm, Phone Pe were some of them when every banks initiated their customers to use their bank’s mobile application for transactions. Even the entertainment and shopping apps like Whatsapp and Flipkart encouraged digital money. Covid increased the usage of digital payment platforms as people were in need of compulsory social distancing but also needed frequent transactions for household expenses.
A major concern during this world of digital money is the lack of an efficient legal framework in India for secure mobile payments. Even though ₹500 and ₹2,000 banknotes were issued in exchange for the demonetised banknotes, transaction of small sums seems to be hectic as the notes are of big amount. Most of the digital payment platforms give payback vouchers to their customers and carrying money in wallet became an old fashion gradually.