Indian Prime Minister Narendra Modi announced on November 8, 2016 that all 500 and 1,000 rupee notes would no longer be legal tender – 86 percent of the currency in circulation at the time, according to India Today. The announcement came as a surprise to many, and the Indian economy is still experiencing the effects today.
In 2016, Indian citizens conducted 95 percent of all transactions in cash, and 85 percent of workers received compensation for work in cash. Modi gave Indians a month and a half to deposit their 500 and 1,000 rupee notes in bank accounts, which was problematic considering that nearly half the population did not have bank accounts.
NDTV describes the goal of demonetization as a crackdown on counterfeit bills and tax evasion. One year has passed and opinions differ on whether or not the program was a success.
According to NDTV, demonetization has wreaked havoc on the informal economy, which relies on cash to pay employees. Consequently, certain industries have suffered over the past year, and imports have increased by 23 percent. India West claims that the GDP has decreased and the economy as a whole is still stagnating due to demonetization.
However, India Today also offers the perspective that the blow to the informal economy caused a formalization of the economy, ensuring better jobs for the poor. NDTV, although focusing on the poor execution of the policy, also conceded that stock prices rose after some initial complications.
Widely criticized by opponents of Modi and his Bharatiya Janapa Party, demonetization caused quick and drastic changes in India when first introduced. The Indian economy has changed in both positive and negative ways, and just one year removed, the long term consequences are still not evident.