THE GIST of Editorial for UPSC Exams : 09 october 2019 (The great disruption of 2016 (Mint))

The great disruption of 2016 (Mint)

Mains Paper 3: Economy
Prelims level: US National Bureau of Economic Research
Mains level: Relations between demonetization and unemployment


  • India’s overnight ban on high-value currency notes in 2016 was a shock alright.

Study highlights

  • According to a study published recently by the US National Bureau of Economic Research, demonetization reduced jobs by up to three percentage points and hurt economic activity by a similar magnitude in the first two months after it took effect on 8 November that year.
  • Research has also found that the exercise aimed at spiking black money, curbing corruption and depriving terrorists of funds led to a two-percentage point decline in bank lending in that period.
  • The research paper examines the impact of demonetization across the country at the district level to make national-effect estimates.
  • The paper concludes that figures put out earlier had underestimated the economic impact of the move.

Outcome of this research

  • The paper’s attention to detail, especially its reliance on data for various parameters on the ground, offers us the reassurance that this study is reasonably comprehensive.
  • The research method employed also reveals that the note ban’s shock was felt unevenly across the country, with some regions hit harder than others because they had a higher proportion of high-value notes in circulation.
  • The study’s period of analysis is rather short, though, and has not captured the secondary effects of the ban are arguably still being felt.


Prelims Questions:

Q.1) With respect to “draft National Logistics Policy”, consider the following statements:
1. It aims to reduce the logistics cost from the present 14% of GDP to less than 10% by 2022.
2. It has been prepared exclusively by the Department of Logistics, Ministry of Commerce and Industry.

Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. Both 1 and 2
D. None

Answer: A
Mains Questions:

Q.1) Do you think the demonetization had felt impact on increase unemployment in India?