ABSTRACT

The paper studies the impact of a major policy announcement of demonetization of 2016 banning the ?500 and ?1000 currency notes on the rural population in the Kachchh district of Gujarat state, which is also Asia’s largest district. The study argues that although the demonetization has led to a reduction in the cash on hand for people, the segment of the population who could easily access the banking facilities and could shift to cashless transaction might have to bear the lesser cost of demonetization than those who did not have access to a formal banking system. The study examines and compares the impact of demonetization between two different segments of rural population, one who is financially inclusive and the other not inclusive. Both, supply and demand side of the status of financial inclusion is considered for creating the population segments. The impact of demonetization is measured in the form of cost of exchanges and loss of income and consumption variables. The study did not find any significant differences in the impact of demonetization on the two different segments of the population.
 

Keywords: Demonetization, Rural Economy, Financial Inclusion