Indian economy is a growing economy. For the overall growth of the country in all sectors, there is the need of well regulated and corruption-free environment in India. For that to curb the black money, corruption and fake money menace P. M. Narender Modi has announced “demonetization” on 8th November 2016. It refers to an economic policy where a certain currency unit ceases to be recognized or used as a form of legal tender. With that, the old currency of 500 and 1000 is ceased to be legal tender and it is replaced by the new currency of 500 and 2000. People faced short-term difficulties for a couple of months but after that, we have seen a lot of positive impacts on Indian economy as well as on Indian society. This paper is an attempt to study the concept of demonetization and how it works in the economy. The purpose of this study is to show the various challenges faced by people in the economy during demonetization period. Through the study, we will show the overall impact on the growth of Indian economy.