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Understanding Demonetization in India by Shrawan Kumar Singh

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CHAPTER 10

Impact on Indian Economy

Like a carpet bombing, demonetization impacts everyone. It could be termed as the mother of all reforms. The move has far-reaching implications. Demonetization technically is a liquidity shock; a sudden stop in terms of currency availability. Such a disruptive policy must have a significant impact on the economy. It creates a situation where the lack of currency jams consumption, investment, production, and employment. The exercise may have short-term as well as long-term impact on consumption, investment, welfare, and growth of the economy. The intensity of the effects of demonetization depends on the duration of the liquidity shocks. The change has got quick pain with a promise of long-term gain, but we have ...

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