The garment industry in Ludhiana has been hit hard by the government's decision to abolish larger bank notes. The move has dealt a severe blow to small time traders and shopkeepers whose 90 per cent trade happens only in cash. The knitwear industry in Ludhiana contributes about 80 per cent of the total woolen/acrylic output of the economy and generates employment for over 400,000 people in the city. Ludhiana has a large number of small industries - both registered and unregistered – that deal in readymade garments, textiles and winter hosiery products.

The industry has seen a fall in footfalls as thousands have been left without cash in the wake of demonetization and strict limits on withdrawals from banks. According to the government, demonetisation is aimed at bringing billions of dollars' worth of cash in unaccounted wealth into the mainstream economy as well as dent the finances of Islamist militants who target India and are suspected of using fake 500 rupee notes to fund operations.