The one rationale for demonetization that was commonly accepted as legitimate was its presumed attack on 'black money'. The other two reasons advanced for it by the government, namely eliminating counterfeit currency and facilitating the move to a cashless economy, scarcely carried credibility. The total value of counterfeit currency was minuscule: a study by the Indian Statistical Institute and the National Investigation Agency put it at only Rs 400 crore, or 0.022 per cent of the total value of currency in the country. And tagging the move towards a cashless economy as an argument for demonetization was neither ethically nor practically defensible.


It was ethically indefensible since the government was not only forcing people's choice of the medium of circulation, but was also pushing them from costless transactions, which cash transactions are, towards costly transactions, owing to charges by banks and fintech companies on digital and other non-cash transactions, and, thereby, boosting the latter's profits at the expense of the people. It was also practically indefensible because given the poor connectivity and literacy among the people, digitization of transactions was a pipe dream. Read more