India's 2016 demonetisation invalidated 86% of circulating currency overnight, causing widespread economic disruption and debate over its effectiveness against black money.
Key Facts
- Demonetised notes returned
- 99.3% of ₹15.41 lakh crore
- Stock market drop (next day)
- Over 6% fall in BSE SENSEX and NIFTY 50
- Estimated jobs lost
- 1.5 million jobs
- New denominations issued
- ₹500 and ₹2000 banknotes
- Notes demonetised
- ₹500 and ₹1,000 Mahatma Gandhi Series
By the Numbers
Location
Cause → Event → Consequence
The Indian government sought to curtail the shadow economy, reduce illicit and counterfeit cash financing illegal activity and terrorism, and promote cashless transactions, leading to the decision to invalidate high-denomination banknotes of the Mahatma Gandhi Series.
On 8 November 2016, Prime Minister Narendra Modi announced the immediate demonetisation of all ₹500 and ₹1,000 banknotes, alongside the introduction of new ₹500 and ₹2,000 notes. Citizens were required to deposit or exchange their invalidated currency within a limited period, prompting mass queues at banks across India.
The move triggered prolonged cash shortages, a drop of over 6% in major stock indices, a reduction in GDP growth and industrial output, and an estimated loss of 1.5 million jobs. Some 99.3% of demonetised notes were returned to banks, leading analysts to conclude the policy failed to remove black money from the economy.