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The Impact of Demonetization and GST

What do we understand by demonetization? Demonetization is the process of either replacing old currency notes with new ones or stripping currency units in use of its status as legal standard. Countries at times take this step to fight black money circulation and hoarding. Fight terrorism by cutting means of cash funding. Prevent counterfeiting of currency notes.

On the 8th of November 2016 Government of India declared demonetization of all 500 and 1000 Rupee notes of the Mahatma Gandhi Series. As a result of this sudden unexpected announcement there was significant disruption throughout the economy. There were several factors that affected the demonetization in a very negative manner. The government maintained absolute secrecy. The ATM was not properly calibrated to meet the demand of the huge population, the government kept changing policy of old note exchange which caused undue harassment to the common man.

The implementation of Goods and Service Tax right after the demonetization was yet another shocker for the mass. It was implemented to remove the tax barriers between states and to create a uniform tax replacing multiple central, state, interstate and local taxes. This was aimed at creating a single countrywide tax on goods and services. However, on the flipside there were and still remain many grey areas given the complex nature of tax in our country. Many manufacturing sector remain very dissatisfied with the way GST has been implemented.

The sudden implementations of these policies have actually impacted the economic growth. It has been observed that India missed out on a “Synchronized global recovery in 2017”.


By: Madhuchanda Saxena






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