"We needed to do it in 1971. We have caused huge losses by not doing this since 1971," Modi told BJP MPs, lashing out at the Congress for not taking effective measures to curb black money in the country.
The Prime Minister referred to former bureaucrat Madhav Godbole's book in which he has recorded how then Home Minister Y.B. Chavan had recommended demonetisation to curb ill-gotten and hidden wealth.
"Godbole says in the book that Gandhi replied saying ‘are no more elections to be fought by the Congress'? Chavan got the message and the recommendation was (dropped)," Modi said.
"This was in 1971 when everybody recommended this. Had it (demonetisation) been done in 1971, the nation wouldn't have been in this situation today."
Modi spoke outside Parliament on the last day of the winter session that was washed away by bedlam over the spiking of the high value currency notes which has caused an unprecedented cash shortage in the country.
The recording of the Prime Minister's speech was broadcast hours after he addressed the BJP Parliamentary Party.
He said the Congress had put the party ahead of the nation but the BJP follows "nation first" ideology.
Modi also took a dig at Leftists for opposing the government's November 8 decision to scrap 500 and 1,000 rupee notes.
"The Communists have compromised their ideology by aligning with the Congress," he sad and recalled how the late veteran Marxist Jyoti Basu had famously said that "Indira Gandhi survives on black money".
"The government (of the Congress) is of the black money, by the black money and for the black money," Modi said, referring to Basu's remarks