In the context of India, demonetization in 2016 involved the government's decision to ban the use of all 500 and 1,000 rupee notes, which accounted for the majority of the currency in circulation at the time. The old notes were replaced with new 500 and 2,000 rupee notes, and people were given a limited time to exchange their old currency for the new one. This move was aimed at combating black money, counterfeiting, and corruption, among other things.
Demonetization had a negative impact on the Indian economy in the short term, as it led to a slowdown in economic growth. This was due to reduced demand, lower consumer spending, and disruptions in the informal sector, which accounts for a significant part of the Indian economy. However, over the long term, demonetization is expected to have a positive impact on the economy by promoting transparency, accountability, and financial inclusion, and reducing the informal economy.