On 8 November 2016, India attempted one of the most dramatic economic policy moves in its modern history. Overnight, 86% of the country’s currency by value was rendered invalid, with the promise of flushing out black money, choking counterfeit notes, widening the tax net and nudging India firmly towards a formal, less-cash economy. A decade later, the dust has settled — and we finally have enough distance to judge the exercise on what it actually delivered, and what it didn’t.
Let’s start with the hardest fact: almost all the demonetised currency came back into the banking system. This single number punctures the biggest political claim made in 2016 — that illicit cash would be extinguished. Large stashes of unaccounted money were not destroyed; they simply found their way back into deposits. Whatever black wealth existed moved into other channels, as it always does. On the marquee goal of purging black money, demonetisation simply did not achieve what was promised.
The economic shock, especially for India’s informal sectors, was real. Construction sites slowed, small manufacturing units faltered, and daily wage workers lost income for weeks. The hit to GDP growth, though temporary, was meaningful. India recovered in the subsequent years, but the short-term pain was sharpest for those with the least buffers — small shopkeepers, contract workers and tiny enterprises that live on cash flows, not credit lines.
Where demonetisation did move the needle was in digital payments and financial formalisation. The months that followed forced millions to adopt digital modes of transaction, familiarise themselves with banking channels, and open accounts. The broader digital public infrastructure — particularly the explosion of real-time payments — benefited from this behavioural shift. India today sees one of the world’s highest digital transaction volumes, and demonetisation undeniably acted as a catalyst in pushing people into that ecosystem faster than they otherwise might have gone.
Another area where demonetisation provided a short-term benefit was in curbing counterfeit currency. The immediate impact was visible, though its long-term effect is less clear. On terror financing and organised crime, public data simply doesn’t offer a definitive answer.
So, was demonetisation a waste or was it useful? The truth lies in the uncomfortable middle. If the objective was to eliminate black money, the exercise fell flat. If the goal was to accelerate digital payments and expand the formal financial net, demonetisation played a catalytic, though costly, role. But catalysts can be unforgiving — and the people who paid the highest price were the ones least prepared for the disruption.
A decade later, the biggest lesson from demonetisation is not about whether bold moves are good or bad. It is about the importance of proportionate, well-designed policy. Structural reforms cannot be built on midnight shocks. They depend on predictable rules, institutional capacity and steady enforcement. India’s tax administration tools, digital infrastructure and bank-onboarding systems have improved vastly — all of which could have driven formalisation without the economic trauma that demonetisation unleashed.
Ultimately, the judgment on demonetisation is mixed. It changed the texture of India’s payments ecosystem, but it did not deliver the sweeping clean-up of black wealth that was promised. It forced behavioural change, but at a human cost that policymakers should not dismiss as collateral. Ten years on, demonetisation stands as a reminder that economic ambition requires institutional depth — and that disruption, however dramatic, is not reform by itself.