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Formalising Finance, Informalising Labour: Demonetisation and the Informal Economy

The Prime Minister of India, Narendra Modi’s announcement over television on the night of November 8, 2016, withdrawing from circulation currency notes with denominations of Rs. 500 and Rs. 1000, has had a cascading effect on the economy.

This Issue Brief maps the pathways through which demonetisation impacts the informal economy. A distinction is made between sectors and categories of labour such as the self-employed, the casually employed and the micro and small enterprises operating below the realm of formal regulation.

This Issue Brief points to the paradox of justifying demonetisation in terms of formalising financial markets even it has informalised labour markets.

Finally, it also points out that there is little likelihood of the move benefiting the informal economy even in the long run.

The author can be contacted at [email protected]

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