Impact of Demonetization on Tax Revenue in India: An Analysis

Indian economy is the fastest growing economy and one of the bright spot among emerging markets in the world. It is one of the bright spots of attracting investment from all over the world. However, the growth black money, increasing in terror funding and counterfeit currency led to growth of parallel economy. Tax evasion is also rapidly growing in the country. In this context, the government has taken the decision of demagnetization of higher value currency. Therefore, the present study has undertaken to analyze the impact of demonetization on tax revenue. The study was based on secondary data collected from various journals and reports. The results of the study indicated that the study the revenue of the government has been increasing after the demonetization of high value notes in the country. More importantly, economy is shifting from informal to formal and more cash economy to less cash economy. However, it is not enough to justify the demonetization because the demonetization of high value currency led to the loss of employment opportunities in informal economy, reverse migration, reduces the private consumption expenditure, insufficient cash in the earlier months of demonetization further dent the economy. In spite of all these constraints, the demonetization has some extent succeeded to clean the economy.