The report further noted that investment demand has been subdued for a fairly long time and the slowdown in investment demand started from the second quarter of 2016-17 (well before demonetisation or GST). Meanwhile another report by Capital Economics also said that the weakness of second quarter GDP data can not be attributed solely to demonetisation as growth had already slowed sharply in the first quarter to 6.1 per cent, from 7.5 per cent in third quarter of 2016 (the last quarter before demonetisation).
It said though on the face of it, demonetisation has been an abject failure given its lack of success in rooting out illicit wealth while also causing growth to slow sharply, it is likely to have some positive effects in the long run, like boosting digital transactions and widening the tax base. The government estimates that demonetisation led to the opening of more than 20 million bank accounts, with more than 9 million new taxpayers being registered as a result.
In its annual report the Reserve Bank estimated that over 99 per cent of the Rs 500 and Rs 1,000 notes that were demonetised by the government in November 2016 have either been deposited or exchanged for new currency.