“It is regrettable this will inconvenience” 1.29 billion people, said Pradip Shah, the founder and former managing director of Credit Rating Information Services of India Limited, one of India’s first credit-rating agencies, without stopping “the flow of black money.”

Even so, the ban on large bills is very likely to hasten India’s transition away from cash. About 78 percent of transactions in India last year were made in cash, compared with 20 percent to 25 percent in the United States, Britain and other countries, according to a report by Google India and the Boston Consulting Group.

The new policy puts India at the “leading edge of countries restricting the use of high-denomination currency notes that are now seen as mostly fueling illegal activities rather than legitimate commerce,” said Eswar S. Prasad, a trade policy professor at Cornell.

As the ban works its way through the system, the real estate market could face a shock.

Indian politicians, among others, not only hold vast amounts of cash, but they are also heavily invested in real estate, where it has historically been easy to convert unaccounted-for money into legal currency. A large percentage of real estate deals are done in unaccounted for cash.

Without that cash, real estate prices could fall sharply. And developers holding large amounts of unaccounted for cash would find it suddenly rendered virtually useless, making it hard for them to pay their bills and finish their projects.

“Can you imagine what’s going happen in real estate tomorrow?” said Mr. Kejriwal, who also anticipated a drop in the prices of gold and luxury items.

The exchange process, too, could prove problematic.

For the next two weeks, people will be able to exchange only 4,000 rupees a day, or about $60. People holding vast sums of unaccounted for cash will find it hard to exchange the money at banks because they will need to explain where they got it, risking tax investigations, experts said.