The government has implemented a major change in the economic environment by demonetizing the high value currency notes – of Rs 500 and Rs 1000 denomination on 8th Nov.2016. Demonetization refers to Withdrawal of a particular form of currency from circulation. Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change of national currency: The current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins. Sometimes, a country completely replaces the old currency with new currency. The main objective of this paper is to study the impact of demonetization on Indian economy and system. The paper is based on the secondary data. The secondary data was collected from various published sources like reports, magazines, journals, newspapers and websites etc. This paper concludes the impact of recent demonetization on the Indian system. The currency is demonetized third time by the present Modi government. This is the bold step taken by the govt. for the betterment of the economy and country. Demonetization works as a cleaning agent and can produce many good things for society.