India is a country which relies mostly on paper currency and consumers do not use digital platforms or online platforms for transactions on a large scale. Government is taking steps to make India a digital economy but the growth rate of digitalization is low as compared to other countries. On 8th November 2016 India's Prime Minister Mr. NarendraModi announced withdrawal of Rs.500 and Rs.1,000 banknotes from circulation. Government said that demonetization would curb black money and counterfeit currency from India. Impact of demonetization on the availability of credit, mode of payment and spending behavior of people and government finances were considered only for short term but the real growth or decline in e-transactions can be analyzed after studying long term data which we have tried to cover in this paper. Our study focused on finding the impact of demonetization on digitalization. It extended further to understand the impact of demonetization on  economy and society. The study too explored whether hike in digital transactions was only due to triggering  event of demonetization and whether this trend is continued post demonetization period. The hurdles which are coming in the way of becoming a digitally literate society also discussed in the paper.