Abstract

The discussion post in favor of demonetization is that the cash that would be quenching “black money” should be lawfully put out to set right the perverse incentive arrangement in the economy. This article has attempted to assess the impact as well as consequences that occur during demonetization and how the tool of Demonetization can be used to exterminate parallel economy. Demonetization is one of the big steps initiated by the Government in addressing several issues like black money, fake currency, corruption, terrorism, etc. The history of demonetization in India and around the world is addressed. Lessons from historical demonetization direct us to redefine a country’s financial system by overpowering the previous causes of failure. Demonetization obliviously brings a lot of embarrassment to the ordinary population but it is for only the short term. However, the long-term benefits of demonetization override the short-term challenges.

Key words: demonetization, Indian economy, black money, parallel economy, tax evasion, fake currency, corruption