Impact of Demonetization Shock and Corona Pandemic on India

Though each shock, may it be external or internal, has its own distinguishing characteristics, but the common thing about them is they tend to destabilize an economy which is hit by that shock. Due to the strong governance and supervision of RBI, the Indian economy successfully managed in mitigating the adverse effect of the Global Financial Crisis (GFC) in 2008 and also showed positive signs of progress in the post crisis era. But this recovery was short lived as the economy had to face two internally self-inflicted shocks in the form of—(a) shift in indirect tax regime with the implementation of Goods and Services Tax, GST) from July 2016 and (b) major change in the currency system in the form of “Demonetization” by replacing higher value denomination from the midnight of 8th of November 2016. But the greatest human suffering and major economic disruption was caused by the outbreak of (COVID-19) virus since beginning of 2020, which started as a health shock but later on turned into a severe economic crisis. The present study attempts to analyze both the short and long run impact of demonetization and the corona pandemic. It also tries to examine whether there is any further possibility of recessionary situation which can again disrupt and destabilize the macroeconomic growth and progress in future. The whole analysis is based on secondary time series data available from various government websites and national and international official statistical agencies of repute.