India’s Prime Minister Narendra Modi announced on November 9, 2016, that 500 and 1000 rupee notes would be taken out of circulation in an effort to reduce corruption, terrorism, black money and counterfeiting, and will no longer be accepted as legal tender in India. His surprise announcement caused chaos in the country as citizens scrambled to adjust to a new monetary norm that banned about 85 percent of cash in circulation.
This move was meant to bring billions of dollars worth of unaccounted money back into India’s economy. The Indian economy has thus far run primarily on cash transactions. This, in turn, has left a substantial proportion of India’s national income unaccounted for, as it doesn’t fall into the tax net. According to a research note by Ambit Capital Research, the size of India’s untaxed black market economy is worth $460 billion. In a “cashless” India, financial transactions will be more easily traceable, and previously unaccounted transactions will not fall through the net of the tax authorities.
The demonetization of the two highest-denomination notes in India has led to an increase in the use of electronic payment services and is a big step