Indians with large amounts of hard currency are usually involved in some sort of tax evasive maneuver and sometimes involved in criminal activity. Corrupt politicians will use enormous amounts of currency to influence elections, so in this case the party in power (BJP, similar in ideology to US Republican party) used demonetization to disarm other political parties before the elections while appearing hard on corruption.

There are numerous ways that wealthy individuals and businesses got around demonetization - for example, a bank manager could spread a large amount of "black money" across multiple accounts in the names of existing account holders, deposit a minimum deposit to avoid reporting requirements, and then withdraw the original amount later (minus a 20% commission) and return it in the form of new currency. The only people who were hurt were the average people who had to stand in long ATM lines or withstand reduced economic volatility. An established business may be able to withstand a month of severely reduced business but a street vendor, laborer, service worker, etc (a large part of the population) could not.

* The political disarming is from my own speculation and the Washington Post wrote a great article on the economic impact: https://www.washingtonpost.com/news/global-opinions/wp/2017/...