GDP growth rate in India has been declining after the sudden demonetisation of high denomination rupee notes on November 8, 2017, which accounted for about 86 per cent of total currency in circulation. The debate is still going on whether the note ban has lingered into the economy and reflected in the growth rate. The changing portfolio of money supply has varying effects on the formal and informal sector of the economy. Official sources argued that, as the money supply grows steadily during post demonetisation period, the impact of currency squeeze has been transient on output and income. However, in an economy with about 78 per cent of consumer transactions takes place in currency terms and about 45 per cent of Gross Value Added is in the informal sector and a large section of the population still remains illiterate, cash deficiency and resulting uncertainty produced undesired effects. Note ban first vaulted the incomes of people in the informal sector and this impaired their economic activity in subsequent months. These effects turned into a demand deflation and hard hit production in the manufactured sector. This paper examines how did the monetary mechanism subsequent to demonetisation intensified downward growth momentum in India?