Demonetization is the act of withdrawing a currency unit from circulation, often by replacing it with a new currency. The term is often used to refer to the decision by the Indian government in 2016 to withdraw high-denomination banknotes from circulation and replace them with new notes. This was a controversial move that was intended to combat corruption and counterfeit money, but it caused significant disruptions in the economy and led to widespread cash shortages. Many people had to wait in long lines to exchange their old notes for new ones, and there was a temporary slowdown in economic activity as people struggled to adapt to the new system.
On November 8, 2016, the Indian government announced that it would withdraw 500 and 1,000 rupee notes from circulation, in an effort to combat corruption and counterfeit money. The move, known as demonetization, was a surprise to most people in India, as the government had not given any prior warning. The withdrawal of the notes was intended to be temporary, but it caused significant disruptions in the economy. Many people had to wait in long lines to exchange their old notes for new ones, and there was a temporary slowdown in economic activity as people struggled to adapt to the new system. Demonetization was a controversial move and its long-term effects are still being debated.
A Constitution Bench of the Supreme Court upheld by a 4:1 majority the decision taken by the central government six years ago in 2016 to demonetize currency notes of Rs 500 and Rs 1,000 denominations. The majority, comprising Justices S Abdul Nazeer, B R Gavai, A S Bopanna, and V Ramasubramanian, held that the Centre’s notification dated November 8, 2016, was valid and satisfied the test of proportionality. Justice BV Nagarathna in her dissenting view held that though demonetization was well-intentioned and well-thought-of, it has to be declared unlawful on legal grounds (and not on the basis of objects).