Why Repeat the Failed Experiment? The Logic & the Economic Cost of the Note Ban

Demonetization is not new in India. Though twice tried earlier and failed, it was of late attempted again for the third time to fight black money, corruption and counterfeit currency. The recent note ban was however unique and unprecedented unlike the previous experiments owing to several factors. One major difference was its devastating impact on the lives of millions of people across our country. The acute liquidity crunch literally brought the informal sector of India to a standstill position. The study tries to understand the logic of using the demonetization exercise again, and analyzes its economic cost in the light of data and evidence available. More so, the study examines the arguments of the advocates of demonetization and draws a realistic conclusion with an alternative proposal. It questions if the government could have avoided this painful exercise and done it differently to achieve the goals it desired.

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