As currency was put out of circulation. According

a result of demonetization, major share of currency was put out of circulation.
According to RBI’s annual report for April 2015 to March 2016, the value of the
currency at the end of March 2016 was 16.2 trillion Indian rupees. The 500
rupees and 1000 rupees formed 86.4% of the value. Demonetization has
invalidated approximately Rs. 14180 billion worth of high value currency. In
addition, the RBI data showed that as of March 2016, 632926 currency notes were
counterfeit known as Fake Indian Currency Notes. In most of the large economies
cash is around 5% of GDP: in India it is 12 to 14%. Less than one third of
Indians only have access to financial institutions. Only 5% of India’s
workforce pays tax, just 15% of the economy is inside the tax net and India’s
tax to GDP ratio is at 17%, which is 5 points lower than comparable countries.
Only 5 to 6% of India’s illegal wealth is expected to be held in cash

Demonetization in India

 Historical data show that demonetization was
implemented twice in India earlier, first in the year 1946 and then in the year
of 1978. In 1946, Rs 1000 and Rs 10000 notes were banned from circulation. But
the same Rs 1000, Rs 5000 Rs 10000 notes were reintroduced by the Reserve Bank
of India in 1954.  Again in January 1978,
the same currencies were demonetized. On both these occasions, the objectives of
demonetization were to curb the circulation of black money, corruption and
removal of fake currency.

India, The RBI introduces new series of notes in every 10 years using either of
the following methods:   

1.     Withdrawing
Old series of notes quietly.

2.     Announce
to the public about withdrawal.

3.     Make
a declaration that a particular series of notes have no value.

third procedure is known as demonetization, which usually does not take place
because of the inconvenience the people have to face.