Demonetization of the Indian Rupee has increased the cost of living in India. With this comes more inflation and if not controlled, will only bring more inflation. The price of some common items of daily consumption have gone up by more than 20%. Despite the increase in price of the goods, some shops have reported that they have actually managed to survive this demonetization and the negative impact it has on the economy.
In the month of November, the Reserve Bank of India declared a ban on the old currency notes of Rs. 500 and Rs. 1000. These notes are the money in which the country’s economy is mainly based on. These notes were essentially used as a form of payment in small and big transactions. Since these currency notes are now invalid in the Indian economy, there has been a severe impact on the GDP, which includes an increase in inflation and decrease in the prices of most basic commodities.
To put an end to the problem, the government has banned the sale of the currency notes in the market to curb the circulation of fake currency notes in the economy of India. With demonetization being announced in the economy, a major part of the population has already felt the financial crunch brought about by this measure. This is why those who have been in the business of buying and selling of the currency notes, have been affected badly by the latest move by the government. With the shortage of the currency notes and the recession which caused it, the economy in India is facing a downward spiral and will continue to do so. The best way for the economy to go back to normal mode is through the implementation of the Direct Cash Transfer Scheme, which can bring about a better monetary system in the long run.