2016-24 Messing up with the monetary system

Last week,  the largest Indian notes were declared to no longer be "legal tender". The large notes, 500 and 1000 rupee notes, constituted 86% of cash in India. The goal of the operation was to reduce corruption.

What is happening now?

• people are running from one cash machine to another to get 100 rupee notes (largest available) with limited succes
• real estate transactions, which are often made in cash, are at a standstill
• low denomination notes are in short supply, with households hording small notes. This means lower spending
• potential hit to growth is large: "UBS economists wrote Tuesday that if cash supplies remain in disarray for another three weeks, as Finance Minister Arun Jaitley has suggested, 1.2 percentage points could be shaved off India’s economic growth, which at more than 7% is presently the fastest among major nations."[...]"“Everything is stopped right now,” said Sunny Narang, who helps run a steel factory near Delhi."
• What happens when cash in short supply? Barter: "In the village of Dalan Chapra, deep in India’s northern hinterland, the cash crunch is forcing residents to return to the original cashless transaction: barter. They are swapping corn and rice for lentils and vegetables, a practice once known only among the village’s poorest."
• Here are some doubts on whether the operation will be successful: "Whether forcing people to turn in their big bills once will deter them from concealing their earnings in the future is an open question. In India, wealth generated outside the taxman’s purview is also stored in property, business assets and precious metals and gems."