Do you think that ‘demonetization’ has accelerated the economic growth in India ? How do you understand the informalization of labour, underemployment and gender discrimination in this context? (2019)
On 8 November 2016 the state withdrew 86% of currency by value overnight. Sociologically it is a model case of what Max Weber called formal rationality — a calculable administrative instrument — producing substantively irrational outcomes for those furthest from the formal economy. It did not accelerate growth; it deepened informality, underemployment and gender disadvantage.
Did it accelerate growth? No
- The premise failed: the Reserve Bank reported 99.3% of the ₹15.41 lakh crore demonetised returned to the banking system, so almost no unaccounted wealth was extinguished.
- Growth slowed: GDP grew 5.7% in April–June 2017, a three-year low.
- Independent surveys of the cash economy found earnings collapsing — about 45% for small shopkeepers in Ranchi, 46% in Amritsar, 44% among the self-employed in Mumbai’s slums — while MGNREGA demand spiked in December 2016. The Periodic Labour Force Survey put unemployment at 6.1% in 2017-18, a 45-year high.
- Cash was not displaced: currency in circulation reached a record ₹42.8 lakh crore by May 2026.
- The defensible gain is infrastructural: UPI handled 23.2 billion transactions worth ₹29.9 lakh crore in May 2026. The Supreme Court upheld the measure’s legality in Vivek Narayan Sharma v. Union of India (January 2023), 4:1, Justice B. V. Nagarathna dissenting — but legality is not efficacy.
Informalisation of labour
Informalisation is the movement of work out of protected, contractual employment into casual, own-account and sub-contracted forms. The India Employment Report 2024 (International Labour Organization with the Institute for Human Development) finds about 90% of Indian workers informally employed; PLFS 2025 puts self-employment at 56.2%. Demonetisation destroyed the working capital of cash-dependent micro-enterprises, turning wage-earners into own-account workers — informalisation within informality. Jan Breman’s footloose labour captures it: such mobility is a symptom of exploitation, not freedom, and shades into neo-bondage.
Underemployment
Underemployment differs from unemployment: work exists but is deficient in hours, productivity or pay. Because Indian surveys count anyone working briefly as employed, the shock registered as falling earnings rather than rising joblessness — Joan Robinson’s disguised unemployment, labour absorbed at near-zero marginal product. Displaced workers returned to agriculture and petty trade, a reverse structural shift; the employment report cited above records 62% of unskilled casual agricultural workers paid below the statutory minimum wage.
Gender discrimination
- Banking access: about four in five Indian women lacked their own account in 2014-15, so exchanging notes ran through male kin, transferring control of women’s money to men.
- Savings: cash saved out of housekeeping money is often a woman’s only autonomous fund, and exchanging it meant disclosing it. Uma Chakravarti’s brahmanical patriarchy and Leela Dube’s work on kinship explain why that matters: it closed the small negotiated space women hold inside patrilineal households.
- Work: home-based, domestic and casual work is overwhelmingly female and paid in cash; Delhi domestic workers reported income losses near 72%. Female labour force participation fell to 23.3% in 2017-18, the lowest recorded, and its later recovery came largely as unpaid family labour.
Conclusion
Demonetisation shows that an instrument perfectly rational in bureaucratic form can be socially regressive in effect, because its costs settle where documentation, banking and bargaining power are thinnest. It redistributed risk downward rather than wealth upward — Gunnar Myrdal’s soft state acting decisively against the wrong people.