New banknotes could not be printed fast enough to replace the old ones, and so limits were put on the amount of cash that could be withdrawn. These restrictions were lifted on March 13, marking the end of the major implementation of this massive project.
It is now time to pause and reflect on the impact, India’s resilience, as well as its ability to bounce back to normality after the disruption of the cash shortage.
According to an estimate from the International Monetary Fund, the effects of that disruption were expected to dissipate by March.
This is perhaps surprising, considering it was only November when Prime Minister Narendra Modi told the nation 500 and 1000 rupee notes would no longer be legal tender to fight the “festering sores” of corruption, black money, terrorism and fake currency.
From midnight the same day, 86 per cent of the cash in the economy was affected, and because there was little warning – because advance notice may have given criminals time to find loopholes – some disruption was inevitable.
“In spite of all these efforts there may be temporary hardships to be faced by honest citizens. Experience tells us that ordinary citizens are always ready to make sacrifices and face difficulties for the benefit of the nation,” Modi said in his speech announcing the changes.
At the extreme end of this, there were media reports of deaths – for example, elderly people waiting in bank queues – were directly attributed to demonetisation.
Less extreme were reports of children being held back from school because their parents needed them to work for them because they did not have the cash to employ their usual casual labour.
Many were faced with the choice of hoarding bank notes before the deadline to exchange them ran out, or spending them. Many chose to keep the cash for essentials like food, rather than give away their last notes to others.