“Impact of Demonetisation on the Indian Economy: A Comparative Study of Pre- and Post-Demonetisation Periods”

Abstract

Demonetisation was announced by the Government of India on 8 November 2016, when ₹500 and ₹1,000 currency notes were withdrawn from circulation. The decision affected different parts of the Indian economy, including economic activity, prices, banking transactions and the use of digital payments. This study examines the impact of Demonetisation on the Indian economy by comparing selected economic indicators before and after Demonetisation. The study uses secondary data on Gross Domestic Product (GDP) growth and Consumer Price Index (CPI) inflation. Five years before Demonetisation (2011–12 to 2015–16) and five years after Demonetisation (2017–18 to 2021–22) are considered for the comparison, while 2016–17 is treated as the year of Demonetisation. Mean, standard deviation, percentage change and the t-test are used for data analysis. The findings show that average GDP growth was lower in the post-Demonetisation period, while average CPI inflation also declined. The statistical results indicate that the difference in GDP growth was not significant, whereas the difference in CPI inflation was significant. The study also considers the effect of other major events, particularly the COVID-19 pandemic, while interpreting the results.