Currency controls can certainly hinder large-scale black money operators, including counterfeiters and financiers of terror networks, but they don't address the conditions that allow hidden wealth to flourish, economists told CNBC.
"If they want to solve problem of black money, they have go to source of the problem, which is the government," Steve Hanke, professor of applied economics at the Johns Hopkins University, told CNBC's "The Rundown" on Monday. "[Black money] is tangled up in Indian red tape, that's why you have to bribe anyone to get anything done."
Daily administrative tasks across public institutions like the police and judiciary can require bribes to civil servants in charge of the paperwork, a practice so rampant that both foreigners and locals see it as part of doing business in India.
Around 43 percent of citizens said they paid a bribe to get something done in the past one year, according to a national survey by community engagement platform Local Circles released earlier this month.
"The key issue at stake here is an improvement in overall governance...But the policies required to tackle governance issues on a lasting basis are much more substantive than just demonetization, you can't rely on that alone," said Dev Kar, chief economist at Global Financial Integrity.