Demonetization, the Cash Shortage and the Black Money
Published By: NIPFP on eSS | Published Date: December, 31 , 2016Demonetisation of INR 500 and INR 1,000 notes in India on November 8, 2016 is different from
many other countries’ scrapping of high value notes in two respects – the withdrawal of their
legal tender status and continuation with INR 1,000 and INR 2,000 notes. It has resulted in a
cash shortage. Non-cash medium of payments may be encouraged by this shortage, but, with
supplies only from the domestic currency presses, the shortage is unlikely to disappear by the
end of 2016. Import of currency printed abroad may provide a solution for ending it sooner. The
impact of the shortage, if it continues, will be fully felt in the last quarter of 2016-17. Its growth
impact in 2016-17 is 0.7-1.3 per cent depending on how much shortage continues and for how
long. [NIPFP Working Paper No. 184].
Author(s): Ashok K. Lahiri | Posted on: Jan 02, 2017 | Views() | Download (593)