Demonetisation 2016

Story hook

At 8:15 pm on 8 November 2016, Prime Minister Narendra Modi appeared on national television. The address lasted 40 minutes. Halfway through, he uttered a line that would empty cash registers across India within hours: "₹500 and ₹1,000 notes will not be legal tender from midnight tonight."

By midnight, 86% of the value of currency in circulation — ₹15.4 lakh crore — had ceased to be legal tender. ATMs ran dry. Petrol pumps, hospitals, and railway stations were temporarily exempted to absorb the rush. Hours-long queues formed outside bank branches the following morning. A weddings season was disrupted. The informal economy — daily-wage labour, vegetable vendors, small manufacturing units — froze.

The government called it a strike against black money, fake currency, and terror financing. Critics called it a "monetary shock" inflicted on a 90%-cash economy. Eight years on, the ₹2,000 note that briefly replaced the ₹1,000 has itself been withdrawn. The Supreme Court has upheld the 2016 decision (Jan 2023). And economists are still arguing whether demonetisation shaved 1.5 percentage points off GDP or 3, whether it accelerated digital payments or merely interrupted cash, and whether the black-money objective was ever realistically achievable through a single midnight stroke.

Why this matters for UPSC

Demonetisation falls under GS-III Indian Economy ("effects of liberalisation on the economy, changes in industrial policy") and GS-II (governance, executive action). It has been a recurring Mains question since 2017 — examiners ask about objectives, outcomes, and second-order effects (digital payments, formalisation, informal-sector impact). Prelims has touched on specific facts — notification date, returned-notes percentage, RBI's Annual Report figures. Interview boards probe the candidate's own assessment — "was it worth it?" — testing balanced analysis.