Demonetization – An Approach to Indian Monetary System

Abstract

Demonetization is an act of stripping currency units of its status as a legal tender. The term demonetization is not new to the Indian economy. In 1938, Rs. 10,000 note was printed and again in 1954. These notes were demonetised in 1946 and 1978 respectively. But during those times, very few people had access to such high
demonetization currency notes and that is why people had not suffered much. The act demonetization announced on 8 November 2016 is not demonetization in its strictest term but it is more of an exchange of old
notes with new notes. While the increase in the circulation of notes of all demonetization had grown by 40% between 2011 to 2016, those of Rs. 500 note had increased by 76 % and those of Rs. 1000 note had increased by only 109%. However, the economy had expanded by only 30% in this period. This shows disproportionate increase of high demonetization notes.