[2] Prime Minister Narendra Modi said that this decision would curtail the shadow economy, increase cashless transactions and reduce the use of illicit and counterfeit cash to fund illegal activity and terrorism.

The move was also criticised as poorly planned and unfair, and was met with protests, litigation, and strikes against the government in several places across India.

[22] The Indian government had demonetised banknotes on two prior occasions—once in 1946 and once in 1978—and in both cases, the goal was to combat tax evasion via "black money" held outside the formal economic system.

[32][33] On 21 October 2016, The Hindu Business Line had also covered a story on demands to withdraw the banknotes to prevent hoarding of black money.

Possibly the most damning observation was that the primary fact on which the government had based its proposal—that the supply of 500- and 1,000-rupee bills had far outstripped the growth rate of the economy—was simply wrong.

[41] After the announcement of demonetisation, a prominent businessman claimed to have received prior tip-offs and rumours warning of the move and after seeing leaked photos of new ₹2,000 notes "knew what was coming", allowing them to preserve their money by converting it into smaller denominations.

[42] A Bharatiya Janata Party (BJP) member from Rajasthan Legislative Assembly, Bhawani Singh Rajawat, claimed in a video that wealthy businessmen were informed about the demonetisation before it occurred.

[48] International airports also facilitated an exchange of banknotes for foreign tourists and out-bound travellers, amounting to a total value of ₹5,000 per person.

[49] Fuel pumps, government hospitals, railway and airline booking counters, state-government recognised dairies and ration stores, and crematoriums were allowed to accept the demonetised banknotes until 2 December 2016.

[72] Money laundering using backdated accounting was carried out by co-operative banks,[73] jewellers,[74] sellers of mobile phones,[75] and several other businesses.

For example, the Greater Hyderabad Municipal Corporation reported collecting about ₹1.6 billion in cash payments of outstanding and advance taxes within the first four days of demonetisation.

[117] Reports in the media noted that although the general public faced a severe cash shortage, some individuals were able to amass tens of millions of rupees in new banknotes; they thus described the demonetisation exercise as being futile.

[123] As a combined effect of demonetisation and the US presidential election, the stock market indices dropped to an around six-month low in the week following the announcement.

[132] Due to scarcity of the new banknotes, many farmers had insufficient cash to purchase seeds, fertilisers and pesticides needed for the plantation of rabi crops usually sown around mid-November.

Global analysts cut their forecasts of India's real GDP growth rate for the financial year 2016–17 by 0.5 to 3% due to demonetisation.

[185] M. Seeni Ahamed, General Secretary of the Indian National League, filed a public interest litigation (PIL) to scrap the decision of demonetisation.

[191] In a 4:1 majority judgement in January 2023, the Supreme Court of India refused to strike down the demonetisation decision of 2016 on the basis of proportionality, saying that the process followed by the government to take the action was not flawed, even if the move did not achieve its objectives.

"[197][198][199] Former senior vice-president and chief economist of the World Bank Kaushik Basu, called it a "major mistake" and said that the "damage" is likely to be much greater than any possible benefits.

[200][201][202] Pronab Sen, former Chief Statistician and Planning Commission of India member, called it a "hollow move" since it did not really address any of the purported goals of tackling black money or fake currency.

"[204] Columbia University economist Jagdish Bhagwati, however, praised the demonetisation, calling it "a courageous and substantive economic reform that, despite the significant transition costs, has the potential to generate large future benefits.

"[205] Nobel laureate Richard Thaler, initially, praised the demonetisation of larger currency notes as "a policy I have long supported, First step towards cashless and good start on reducing corruption.

"[208] Forbes wrote that "[w]hat India has done is commit a massive theft of people's property without even the pretense of due process—a shocking move for a democratically elected government.

"[12] Jayati Ghosh, C. P. Chandrasekhar and Prabhat Patnaik wrote that demonetisation was unnecessary and unsuccessful, while it damaged the economy and adversely affected the lives and rights of the Indian people.

[211][212] Deepak Parekh (Chairman of HDFC) had initially appreciated the decision of demonetisation, but later said that the move had derailed the economy, and expressed skepticism about its outcome.

Initially, the move to demonetise and try to hinder black money was appreciated, but the manner in which it was carried out by causing hardships to common people was criticised.

[235][9] Prem Chand Gupta, a member of the Rashtriya Janata Dal, questioned a statement of Modi from the unscheduled TV broadcast on 8 November, "If it was planned 10 months ago, how did RBI Governor Urjit Patel sign on new note?".

Praful Patel, a member of the Nationalist Congress Party, stated that "the government was not even prepared to recalibrate the ATMs while announcing the move.

[247][248][249] The International Monetary Fund's spokesperson Gerry Rice told that it supported the efforts to fight corruption and illegal finances but cautioned about the disruptions.

"[248] Former Prime Minister of Finland and vice-president of European Commission Jyrki Katainen welcomed the demonetisation move stressing that bringing transparency will strengthen the Indian economy.

He noted that the people might attribute the implementation shortcomings to institutional weakness while the government could take credit for its attempt to curb the black money.