The country has also moved towards digital payments and a lot of progress has been made in this regard

The Supreme Court has upheld the Narendra Modi government’s November 2016 decision to demonetise Rs 500 and Rs 1,000 currency notes. It is believed that this will end demonelisation controversy going on for years.

Significantly, the opposition parties and many economists had been opposing the demonetisation. Their argument was that due to this decision of the government, the general public had been put to troubles; and at the same time small businesses suffered huge losses and this also affected their employment and livelihood.

But on the other hand, a large section in the country was welcoming and supporting this decision of demonetisation. One of the arguments of the government was that this decision of demonetisation would attack black money. Although after demonetisation, most of the cash in the country was converted into new currency notes, it is also true that after demonetisation, the cash which was lying unused somewhere in the form of black money, got included in the banking system and it had contributed to the development of the country.

It may be noted that the demand for banning of Rs 500 and Rs 1000 notes was being made by many important people, to curb black money, including Yoga Guru Baba Ramdev and Subramaniam Swamy for a long time. Although, in order to bring black money into the mainstream, in the past, several voluntary disclosure schemes had been announced by the previous governments. But in spite of many such schemes, black money worth Rs 1,25,000 crore could only be brought out.

It can be said that this was the first major effort of any government to bring out the black money lying in the form of cash. The Prime Minister named it as ‘Swachhta Parv’, ‘Honesty Parv’, ‘Fight Against Corruption’, etc. It is also true that in spite of all the opposition from the opposition parties, the common man, despite facing various difficulties, strongly supported demonetisation and the common man was considering himself a partner in this fight against black money.

If we consider the difficulties of the common man, we have to understand that according to the Social, Economic and Caste Census 2011, in 92 per cent of the households, the maximum income of any member was less than Rs.10,000 per month.

That’s why the common man was not expected to be harmed by this decision. Withdrawal of old currency notes of Rs 500 and Rs 1000 by the government, also helped the country getting rid of the havoc of fake currency on a large scale. Large scale circulation of fake currency notes by Pakistan and other enemy countries was increasing through their local contacts. Due to this many anti-national activities, including terrorism, Naxalism, stone pelting, were rising. It was seen that after demonetization, all these anti-national activities were curbed.

Significantly, the case of leakage of secret features of currency printing also came to the fore about 10 years ago and it was feared that the fake currency printed according to these features couldn’t be identified also.

Dr Bhimrao Ambedkar, the chairman of the Constitution Draft Committee of independent India, also expressed his views in favour of demonetisation. About 99 years ago, Dr Ambedkar had written in his thesis at London School of Economics, that the currency should be replaced after every ten years. He opined that by doing this inflation and corruption can be reduced.

One of the important advantages of the decision of demonetization, is curbing inflation. Obviously, black money in the form of currency in large quantities increases the purchasing power of the rich, which fuels inflation.

A reduction in inflation was also observed after demonetisation. Between December 2016 and November 2022, Consumer Price Index (Consumer Inflation) increased by only 32.5 per cent, whereas in the previous six years, this increase was 54.1 per cent. With the successful implementation of demonetisation by the Narendra Modi government and ultimately, approval of this decision by the Supreme Court, the demonetisation debate has not only come to an end. Along with demonetisation, the country has also moved towards digital payments and a lot of progress has been made in this regard. Today 40 per cent of the world’s digital payments happen in India. The special thing is that most of the digital payments, UPI, etc., are free.

Due to this, there has been a huge reduction in the cost of transactions in the country and due to this there has been a lot of progress in the ease of doing business. Many countries of the world are eager to adopt India’s UPI platform. This is the biggest contribution of demonetization to India.

(The author is a professor in Delhi University)