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Demonetization refers to removal of a particular form of currency from circulation. Demonetization is necessary whenever there is a need of change of national currency. The old unit of currency must be detached and replaced with a new currency unit. The currency was demonetized first time in 1946 and after that in 1978. Many of the other countries have implemented this step to control black money like Russia, South Korea, Nigeria etc. but most of them were fail.This paper reflects the need and effects of demonetization on Indian economy. Demonetization is beneficial for some sectors while it is also negative for some sectors. Demonetization was necessary but it should be done with proper planning and policies.