**Executive Summary**
This document is the answer to Lok Sabha Unstarred Question No. 1319 regarding the impact and outcomes of the demonetization policy implemented in November 2016. The question was to be answered on Monday, December 8th, 2025. The document details the objectives of demonetization, provides updates on currency in circulation and GDP growth and acknowledges the government has not conducted its own post-facto assessment but references an RBI study.
**Key Points / Main Content**
* **Objectives of Demonetization (November 2016):**
* Move towards a less cash economy.
* Reduce generation and circulation of black money.
* Promote the digital economy.
* Contain the rising incidence of fake currency notes in circulation.
* Limit the usage of high denomination banknotes for storage of unaccounted wealth.
* Contain the rising level of using fake currency for financing subversive activities.
* **Post-Facto Assessment:**
* The government has not conducted its own post-facto assessment.
* The RBI published a study titled 'Macroeconomic Impact of Demonetization – A Preliminary Assessment' in March 2017 (available on the RBI website).
* **Currency in Circulation:**
* Currency in Circulation (CiC) stood at ₹17.97 lakh crore on November 4, 2016.
* CiC declined to ₹10.7 lakh crore on January 27, 2017.
* CiC increased to ₹38.29 lakh crore as on October 17, 2025.
* **Economic Impact:**
* Real GDP growth averaged about 7.1% in 2016-17 and 2017-18 after demonetization.
* India's real GDP grew at an average rate of 7.3% between 2016-17 and 2024-25 (excluding pandemic years).
* Broad Money (M3) grew at an average rate of 8.0% during 2016-17 and 2017-18, and 9.6% on average between 2016-17 and 2024-25.
* Average monthly UPI transactions rose from ₹579 crore in 2016-17 to over ₹25.2 lakh crore in 2025-26 (up to November 2025).
**Impact Analysis**
**Stakeholder: Government of India**
* **Impact:** The document provides an official statement on the impact and outcomes of the demonetization policy.
* **Action Required:** Review the information and prepare to address any further questions or concerns that may arise.
**Stakeholder: Reserve Bank of India (RBI)**
* **Impact:** The document references a study published by the RBI on the macroeconomic impact of demonetization.
* **Action Required:** No specific action required, as the study has already been published.
**Stakeholder: General Public/Economy**
* **Impact:** The public is affected by the currency in circulation and overall economic growth. The document offers insights into the government's perspective on these factors following demonetization.
* **Action Required:** No direct action is required, but the information may influence public opinion and economic behavior.
Key Entities Referenced
Demonetisation: The central policy under discussion, specifically the 2016 demonetization policy in India.
Reserve Bank of India (RBI): Published a study assessing the macroeconomic impact of demonetization, and is responsible for currency circulation.
Ministry of Finance: The ministry responsible for answering questions about the demonetization policy.
S.O. 3407 (E): Gazette notification specifying the objectives of withdrawal of legal tender character of specified bank notes.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMETN OF ECONOMIC AFFAIRS
LOK SABHA UNSTARRED QUESTION NO.1319
TO BE ANSWERED ON MONDAY, 8th DECEMBER 2025 / AGRAHYAN 17, 1947 (SAKA)
Impact and Outcomes of Demonetisation
1319. Ms Sayani Ghosh
Will the Minister of FINANCE be pleased to state:
(a) the main objectives of the demonetisation policy implemented in November 2016;
(b) whether the Government has conducted any post-facto assessment to determine the
extent to which the intended goals, such as curbing black money, reducing counterfeit currency
and promoting digital transactions have been achieved, if so, the details thereof and if not, the
reasons therefor;
(c) whether it is true that despite demonetisation, currency with the public has more than
doubled in 2025, if so, the details thereof;
(d) whether any study or report has been undertaken to evaluate the economic impact of
demonetisation on employment, the informal sector and small enterprises, particularly during
the years immediately after implementation of the said policy, if so, the details thereof; and
(e) whether the Government acknowledges any short-term or long-term disruptions caused
to economic growth or liquidity due to demonetisation, if so, the details thereof?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) The mission of the Government is to move towards a less cash economy to reduce
generation and circulation of black money and to promote digital economy. As stated in the
Gazette notification S.O. 3407 (E) dated November 08, 2016, issued by Government of India,
the objectives of withdrawal of legal tender character of specified bank notes are as under:-
(i) to contain the rising incidence of fake currency notes of the specified banknotes which were
largely in circulation.
(ii) to limit the usage of high denomination banknotes for storage of unaccounted wealth.
(iii) to contain the rising level of using fake currency for financing subversive activities like
drug trafficking and terrorism.(b) to (d) No study on effect of withdrawal of legal tender character of the Specified Bank
Notes (SBNs) on Indian economy has been done by the Government. However, RBI has
published a Study titled ‘Macroeconomic Impact of Demonetization – A Preliminary
Assessment’ in March, 2017, which is available on the website of RBI.
(https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/MID10031760E85BDAFEFD497193995
BB1B6DBE602.PDF)
As per RBI the Currency in Circulation (CiC), which stood at ₹17.97 lakh crore on November
4, 2016, and had declined to ₹10.7 lakh crore on January 27, 2017, soon after demonetisation,
has now increased to ₹38.29 lakh crore as on October 17, 2025. This includes Banknotes in
circulation, e₹ and Coins. The currency supplied by RBI is a function of demand from the
public/economy. The demand for currency also depends upon several macroeconomic factors
including economic growth and level of interest rates.
(e) The National Accounts data released by the Ministry of Statistics and Programme
Implementation shows that the real GDP growth averaged about 7.1 per cent in the immediate
years after demonetisation (2016-17 and 2017-18), indicating that economic momentum
remained robust. Over a longer horizon, India’s real GDP has grown at an average rate of 7.3
per cent between 2016-17 and 2024-25 (excluding the pandemic-affected years 2020-21 and
2021-22), reflecting continued domestic demand and the impact of structural reforms. India
has therefore remained one of the fastest-growing major economies in the post-demonetisation
period.
Liquidity conditions also remained stable in the years after 2016-17. Broad Money (M3), a key
indicator of liquidity, grew at an average rate of 8.0 per cent during 2016-17 and 2017-18, and
at about 9.6 per cent on average between 2016-17 and 2024-25. Further, the rapid expansion
of digital payments since 2016-17 is evident from the rise in average monthly UPI transactions
from ₹579 crore in 2016-17 to over ₹25.2 lakh crore in 2025-26 (up to November 2025).
******