Understanding Demonetization in India

CHAPTER 12

Demonetization as a Move to a Less-Cash Economy

In a country whose economy was dominated by cash transactions, demonetization was a drastic attempt to change the behavior of Indians, moving them away from the use of currency notes toward electronic modes of transferring money. However, cash still remains the oxygen of the Indian economy. Given the magnitude of informal sectors in Indian economy, unreported tax-liable income earned in cash even in the pursuit of legitimate activity is likely substantial. Taking into account the economy’s move toward less-cash economy, this chapter seeks to deal with the following issues:

I.	Concept of cashless transaction
II.	Rationale behind a less-cash economy
III.	Use of cash in the United ...