Reflecting on India's Pivotal Demonetization Moment

On the evening of November 8th, 2016, while enjoying a meal at a restaurant in the heart of Chennai, I found my attention drawn to the TV screen. Our Prime Minister was addressing the nation, his words muted by the public setting. However, the scrolling text at the bottom of the screen conveyed a seismic announcement: "₹500 and ₹1000 notes are illegal from midnight."

The news was as unexpected as it was astonishing. I urged the hotel manager to amplify the volume, sensing the gravity of what had just been revealed. Soon, the entire vicinity was abuzz with discussions about this unprecedented development. I spent hours engrossed in televised debates that followed the announcement, conversations that seemed to be taking place in every corner of the country.

In those initial moments, many of the people I spoke to, friends and everyday citizens alike, found themselves in agreement with what was being hailed as a bold and strategic move. It appeared, on the surface, to be a masterstroke.

Numerous rumors swirled at the time, suggesting that demonetization had been implemented to thwart the influx of counterfeits from neighboring countries. It was believed that this move would eradicate corruption within the system, channeling all funds into the legitimate financial framework, thereby enhancing the transparency and simplicity of taxation. Moreover, it was thought that the government would gain the ability to meticulously monitor the flow of funds, curbing substantial illicit transactions. Regrettably, it seems none of these anticipated outcomes came to fruition.

As time elapsed, however, the situation became more complex. The anticipated influx of new currency faced delays, while the physical dimensions of the newly introduced ₹2000 notes posed compatibility issues with older ATM machines. Small-scale traders such as street vendors and vegetable sellers encountered significant hurdles in conducting their businesses. The long queues outside ATMs triggered public apprehension. Yet, despite these challenges, the situation managed to avoid becoming dire, primarily due to the growing adoption of digital banking and transactions.

One of the most resounding successes of demonetization was the swift acceptance of the Unified Payment Interface (UPI) and the meteoric rise of services like PayTM. Undoubtedly, this marked a major achievement—a significant portion of the informal economy was seamlessly integrated into the formal banking sector. I distinctly recall the arrival of Tez (now known as Google Pay) in September 2017, accompanied by its initial wave of enticing cashback offers that captured the attention of many young individuals.

From a personal standpoint, my own experiences were relatively smooth. Save for a solitary occasion, I managed to evade the need to queue up at ATMs for cash withdrawals. My possession of the now-banned currency notes was also limited, sparing me any pressing concerns on that front.

In the backdrop, debates concerning the merits and drawbacks of demonetization persisted, and these discussions even reverberated through the lead-up to the 2019 elections. However, the resounding victory of the ruling party's second term laid to rest many of these debates. The election outcome seemed to signify popular support for the initiative, underlining a widespread belief in the government's actions.

While I acknowledge that I lack the expertise of an economist to comprehensively dissect the intricacies of the process, it remains evident that the move was audacious and momentous. Its impact was undeniable—it propelled India into an era dominated by digital transactions and technological innovation. This, in itself, stands as a compelling reason to regard demonetization as a pivotal moment in the nation's history.