Impact of Demonetization in India: A Comparative Study of Agriculture, Real Estate, and Manufacturing Sector

This paper conducts a comparative empirical analysis of the short-term sectoral impact of the Central government's demonetization of ₹500 and ₹1000 currency notes on November 8, 2016, specifically focusing on the Agriculture, Real Estate, and Manufacturing sectors. Utilising high-frequency secondary data from November 2016 to June 2017 (RBI reports, APMC data, PMI indices), the study finds a significant, yet differential, transient adverse shock across the sectors. The Agriculture sector, due to its heavy reliance on cash for inputs and transactions, experienced an acute initial shock (Nov-Dec 2016) reflected in decreased mandis arrivals and price volatility, followed by a swift recovery post-remonetisation. The Real Estate sector faced a more structural and persistent slump in the resale and luxury segments, driven by the crackdown on unaccounted wealth and cash transactions. Manufacturing, particularly the unorganised segment, saw a sharp contraction in the Purchasing Managers' Index (PMI) and industrial output due to sudden demand and liquidity shocks, which largely dissipated by Q4 FY 2016-17. The paper concludes that the policy's primary short-term effect was a temporary liquidity-driven slowdown that accelerated the formalisation of the economy, but disproportionately harmed the unorganised and cash-intensive segments of these key sectors.