Sudden liquidity shocks impose hidden costs on essential services. Examine with reference to India's 2016 demonetisation and its effects on access to medicines.

A liquidity shock is a sudden fall in the cash available in an economy. On 8 November 2016, about 86% of India's currency by value was withdrawn with only four hours' notice [1]. The wider economy recovered fairly quickly. But forthcoming research on medicine sales suggests that the costs fell unevenly on an essential service: healthcare.

How the cash shock reached medicine buyers

• Scale: Specified Bank Notes worth ₹15.4 trillion (86.9% of notes in circulation) were withdrawn. Notes in circulation fell by about ₹8.8 trillion by early January 2017 [2].
• Evidence base: A study uses AIOCD retail pharmacy sales data covering 805 firms, 31 regions and 18 illness categories. It is the first product-region-time level dataset used to study demonetisation [1].
• Acute vs chronic: People on chronic medicines buy every month, so they can search for cheaper options. People buying acute medicines (for infections, pain or stomach illness) must buy at once, with little chance to plan or compare prices [1].

Why the safeguards fell short

• Narrow exemption: At first, old notes could buy medicines only at government hospital pharmacies, and only with a doctor's prescription [3]. That was an extra hurdle for people who fell ill suddenly.
• Short window: The exemptions were extended only step by step, first to 14 November [4]. Meanwhile, the deposit window ran until 30 December 2016 [5].
• Vulnerable groups: Informal money flows were hit much harder. Low-skilled migrants without enough documents struggled to exchange their cash wages [6].

Hidden costs the data understate

• Sales data count medicines bought. They do not show treatment that was skipped or paid for with borrowed money. Monthly figures also smooth out the worst days of the shock [1].
• Global parallel: Nigeria's 2022-23 currency redesign gave people too little time to switch. This caused a cash crunch and a black market for the new notes [7].

Demonetisation shows that a brief shock to the whole economy can leave lasting costs for individuals' access to healthcare. These costs fall hardest on people with sudden illness, informal workers and the unbanked. Future currency changes should include carve-outs for essential services:

• let all licensed chemists accept old notes
• drop the prescription requirement for acute medicines
• keep exemptions in place for the full exchange window

They should also allow longer transitions, with digital public infrastructure as a complement, not a substitute. Such safeguards would uphold the right to health under Article 21 and SDG 3's goal of access to essential medicines for all.