On 8 November 2016, the Prime Minister of India announced the demonetization of notes that made up 86% of cash in circulation in India. I examine the impact of the prolonged cash shortage that followed on the political competition in the assembly elections within a year of the event. Using a difference-in-difference methodology, I show that demonetization had significant impacts on the political competition and the voter turnout in the elections that followed. Next, using the demonetization event and voter turnout in the past as instrumental variables for the number of candidates running for office and voter turnout, I show that Bhartiya Janta Party (BJP), the political party in power at the federal level that implemented demonetization, benefited from the decrease in competition and increase in voter turnout. However, comparing elections within a year after demonetization but in different months, I find suggestive evidence that voter preference might also have changed in favor of BJP over this period.