Institute for Social and Economic Change
Working Paper: 450
Demonetisation 2016 and Its Impact on Indian
Economy and Taxation
Demonetisation is a process in which the government withdraws legal tender status of currency issued by it. The first demonetisation happened on 12th January, 1946 and the second on 16th January, 1978. The demonetisation 2016 is the third such decision which took place on 8th November, 2016, in which Rs. 1000 and Rs. 500 currency was demonetised, which was 86 per cent of the total currency under circulation. The present study attempts to understand the scope and reasons of demonetisation and its impact on various sectors of the economy and on taxation. The study is descriptive in nature and uses secondary data taken from various sources like the Reserve Bank of India, Ministry of Finance and other sources. The study concludes that demonetisation had both positive and negative impacts.