08th November 2021 marked the 5th anniversary of the announcement of demonetization in India, wherein the legal tender currency of Rs 500 and Rs 1000 were declared illegal, null & void in India.
Reasons because of which demonetisation can be said to be a failure:
Disruption: It caused widespread disruption to the economy.
For example, personal hardship, loss of income and savings, and economic downturn.
Very few of its intended goals could have been fulfilled such as a cap on corruption, reduce the black money usage, reducing the flow of black money, enhancing the digital economy ecosystem in India.
Also, more than 99.3% of demonetized notes have been returned to banks.
There is no difference in the tax base: If the intention was to register a permanent increase in the tax base, it failed miserably.
Enhanced use of physical cash: Cash expenditure has now surpassed the levels that existed before demonetisation.
Also, after COVID-19, monetary dependence is very high.
Did the narrative on black money influence the decision of demonetisation in any way:
Black money is not really kept in cash except for a small amount but is usually collected through houses, buildings and other assets.
Black money theory: is easily seen and understood by ordinary people, who see corruption in everyday life and see it in cinemas, newspaper articles, or in everyday conversations over the years.
Psychological satisfaction: The idea of ??a miraculous act and a beating against illegal wealth is deeply satisfying.
Moral issue: Criticism of demonetisation may suggest that critics are interested in protecting black money and corruption.
Change of narrative: When it became clear that the demonetized money was being returned to the banks at a higher rate than expected, the narrative was changed to shift focus from black money & counterfeit currency to enhanced usage of digital / cashless payments.