November 8, 2016, marked a historic day in India when the government, led by Prime Minister Narendra Modi, announced the demonetization of Rs 500 and Rs 1000 currency notes. This bold move was aimed at combating black money and ushering in a digital payment revolution. Seven years later, it’s time to reflect on the developments and changes that have transpired since that fateful day.
- Introduction of Goods & Service Tax (GST)
Shortly after demonetization, India witnessed the implementation of the Goods and Services Tax (GST) on July 1, 2017. This tax reform streamlined the country’s indirect tax system, replacing the previous Value Added Tax (VAT) with a destination-based, multistage tax known as GST. It’s designed to be levied at each stage of production but refunded to all parties except the final consumer.
- Criticism from Opposition Parties
Demonetization wasn’t without its share of controversies. Opposition parties criticized the government for the inconvenience faced by citizens who had to queue for hours to exchange notes. Shocking images of discarded Rs 500 and Rs 1000 notes in rivers and lakes surfaced on social media, with claims that they represented black money stashed away by political parties for election purposes.
- During COVID-19 & Lockdown
As the COVID-19 pandemic unfolded in 2020 and 2021, Indians began stockpiling cash to meet essential needs. Despite a drop in cash circulation immediately after demonetization, the currency in circulation steadily increased. People hoarded money during strict lockdowns to weather the uncertainties brought by the pandemic.
- Withdrawal of Rs 2000 Notes
In 2023, the Reserve Bank of India (RBI) decided to withdraw the Rs 2000 currency notes introduced in 2016. These notes were initially introduced to meet the immediate currency demand after demonetization. With the objective achieved and other denominations available, the printing of Rs 2000 notes ceased in 2018-19. These notes, with an estimated lifespan of 4-5 years, had limited use in everyday transactions. Hence, the RBI chose to phase them out.
India’s Transition to Digital Payments
Over the past seven years, India has witnessed a significant shift towards digital payments and cashless transactions. Unified Payments Interface (UPI) and various digital payment mechanisms have gained widespread acceptance, reducing the reliance on cash.
As India commemorates the anniversary of demonetization, it’s evident that the country’s payment landscape has transformed. Cash payments still hold their place, but digital payment methods have become more accessible, convenient, and popular among the public. This shift aligns with the government’s objective to curb black money and promote digital financial transactions.
