Critically examine the failures and achievements of Demonetization in its second year. How far do you think it has been successful in its aims and aspirations? (250W/15M)


Model Answer:


  • Demonetization in simple term is withdrawal of a particular form of currency (Rs. 500 and Rs. 1000 currency notes in Indian context) from circulation. It is the act of stripping a currency unit of its status as legal tender. In this, the current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins.
  • The Government of India has withdrawn Rs. 500 and Rs. 1000 from circulation since November 2016. The move of the government was largely to curtail black money running a shadow economy. Apart from black money the aim was also to counter terror funding, check counterfeit currencies in circulation etc.

Criticism: Failures

  • Demonetization was aimed to recover about 10 lakh crore of high value notes in circulation out of about 16 lakh crore. The pre-assumption of the government was that about 6 lakh crore rupees was under black money. But the final disclosure by the RBI in August 2018 says that it has recovered 15.31 lakh crore and only Rs. 16,000 crore was not returned to the RBI. This indicates that much of the money in circulation or either under black deposits was able to get into the banking system making them legal. And thus, in essence, demonetisation has not met the government’s goal of wiping out black money from the Indian economy.
  • The move has also reduced the RBI’s profit as central bank spent Rs. 21,000 crore in handling the mechanics of demonetisation, including printing of notes. This resulted into RBI paying lesser dividend to the central government.
  • The sudden withdrawal has made adverse impact on business and economy. Instead of growing economy India has become a standstill and no growth economy.
  • India is an agriculture based economy. Due to the cash crunch, the farmers especially small and marginal who largely depend on cash to buy seeds, fertilizers and to pay for sowing, borrowing water for irrigation and for other related agriculture equipments remained worst affected and could not complete the crop related activity.
  • Since small branches of the banks were also not supplied with adequate cash within time of sowing season of the crop, farmers could not get their crop loans disbursed. This added to the woes of the farmers leading to a weak agriculture production the coming year.
  • Real Estate sector came to a standstill and is still gasping for buyers of the constructed and half constructed inventory without buyers. This has resulted in poor cash flow leading to a poor demand.
  • Demonetization has made the situation become chaotic. Tempers were running high among the masses as there was a delay in the circulation of new currency.
  • Due to the inability to pay cash to poor daily wage workers, the small employers have stopped their business activity.
  • Absence of Rs. 100 and Rs. 500 notes in circulation (less available) added more to the woes of the common people with low incomes as they were not able to get changes of Rs. 2000 in return.

Achievements of Demonetization:

  • However, demonetisation had some positive impact on the economy as well which reflected through increase in Assets Under Management (AUM) of mutual fund industry.
  • As per RBI, seven specific accounts, namely Basic Saving Bank Deposit Accounts, PMJDY Accounts, KCC, dormant or inoperative accounts, co-operative banks’ accounts with scheduled commercial banks, bullion trader/jewelers’ accounts, and loan accounts, witnessed a steep rise in deposits. These deposits further helped banks’ ability to lend to small businesses.
  • One of the biggest achievements of demonetization has been seen in the drastic curb of terrorist activities as it has stopped the funding to terrorism which used to get a boost due to inflow of unaccounted cash and fake currency in large volume.
  • Demonetization associated with various Acts and Rules helped to some extent in curbing black practices. It has disclosed many unaccounted property in abroad, led to enhanced tax base by the collection of more taxes, led to undisclosed income detection by the IT department etc.
  • Demonetization has driven the country towards a cashless society and promoted digitalization. Lakhs of the people even in remote rural areas have started using cashless transactions. The move has promoted banking activities. Now even the small transactions have started going through banking channels and the small savings have turned into a huge national asset.
  • Measures like IDS and PMGKY instilled fear in the minds of unscrupulous businessmen, which resulted in the declaration of Rs 70,250 crore undeclared income. This income was taxed at upwards of 45 per cent, raising the government’s revenue.


  • In nut and shell, the demonetization associated with other acts, rules and regulations was to some extent successful, however, the unplanned sudden implementation had led to chaos in market for some time.
  • This move has certainly benefitted the economy in terms of increased tax base, bringing many under tax net, disclosure of income etc. at the same time affecting slow growth of national income.
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5 years ago

CD TEST 20378comment imagecomment image

Pritam Kumar
5 years ago
Reply to  Invincible

Hello Invincible,
-Image looks that you have clicked in hurry…click properly…

-Introduction seems okay…but it would have been good if you have also mentioned the meaning of demonetization…
-Your points under achievements…seems incomplete…they convey only half or no idea….You need to justify the points with completeness in itself…
-When you are talking about GST…you certainly should link the point with demonetization…
-You have mentioned points in too general way…bring specificity in points…talk particularly about demonetization….with ideas and points in its complete sense…

Overall, an average attempt…keep practicing…will improve for sure….
Keep writing…
Refer our model answer or other best answer reviewed for better clarity….

5 years ago

CDTEST20663comment image comment image

Pritam Kumar
5 years ago
Reply to  Kapiushon

Hello Kapiushon,
Few Suggestion:
-Try interlinking your ideas together…this will bring connectivity among points…Sudden appearance of points in changed context shows that you are starting new conversation without closing the first one….so first task need to be completed first…
-Use proper format sheet with margins on both edge of page…for writing…afterall this habit is going to continue in exam hall also…so practice right now…

-You need to cautious while using words…In the first line of intro…remove black money…conveys meaning in different context (as it was kept somewhere)…Also your intro is poor…You need to introduce the topic first in short….here we need to talk about the meaning of demonetization…then mention about Indian demonetization two years back…Then mention the cited reasons behind such move in the next para….
-Under failure….point 1 is incomplete…when all the money got deposited then why the aim could not be accomplished…? As well as point 7…how RBIs autonomy came in question…Justification needed…explain….
-Keep in mind….points and ideas should have to be complete in itself….
-Points under the heading of success are good….
-Poor Conclusion….
Overall, except intro and conclusion, this answer seems to be okay….further improvement is inevitable…

Keep writing…
Marks awarded: 4.5/15

5 years ago
Reply to  Pritam Kumar

Thanks for review. Will try to implement suggestions in future answers.

prafull sharma
5 years ago


comment image comment image comment imagecomment image

Pritam Kumar
5 years ago
Reply to  prafull sharma

Hello Prafull,
-You seem to be exceeded the word limit in this answer….
-Introduction is poor…here at least in one line you should have mentioned the meaning of demonetization in essence….
-Under aims points are good…
-Some of your points are contradictory…one the 1st page last para you have mentioned that…Demonetization increased cashless transaction….and on the 2nd page…last para you have mentioned that cash transaction has grown…
-Some of the points does not convey idea in complete sense…like…point 3 (2nd page), point 5 (3rd page)….
-The question is more about criticizing…so criticism is more important here…
-Conclusion is too big and is repeating the same ideas which are also mentioned in challenges and failures….though the last para of answer is good…and this last para only seems good conclusion…

-Overall, this is a bit above average answer…You have ideas, points but lack in planning…
Few suggestions:
You need to plan your answer….before writing the final answer.
Though your attempt is good…Your potential is much more then this presentation….keep practicing will improve…
Marks awarded: 4.5/15

prafull sharma
5 years ago
Reply to  Pritam Kumar

Thanks for review, will improve on it. I think increment in cashless transactions happened from very low to signifucant level. Yet cash transactions simulatneously increased. So there is no contradiction i guess


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