As of October 2022, currency with the public jumped to a new high of Rs 30.88 lakh crore, an increase of 71.84% from cash circulation levels of November 4, 2016, when Prime Minister Narendra Modi banned Rs 500 and Rs 1000, constituting 86% of India’s overall currency
Six years after the painful demonetisation exercise was launched to reduce dependence on paper currency, and weed out ‘black money’ and corruption, cash remains the most preferred choice of transactions in India.
As of October 2022, currency with the public jumped to a new high of Rs 30.88 lakh crore, an increase of 71.84% from cash circulation levels of November 4, 2016, when Prime Minister Narendra Modi banned Rs 500 and Rs 1000, constituting 86% of India’s overall currency, reported PTI.
According to the RBI data released Friday, cash circulation in the Indian economy as of October 21 stood at Rs 30.88 lakh crore. The RBI had pegged currency with the public at Rs 17.77 lakh crore at the time of demonetisation on November 4, 2016. The RBI published date for Money Supply for the fortnight ended October 21, 2022, on November 3.
The government said the entire demonetisation exercise, criticised by many economists for poor planning and execution, was aimed at making the Indian economy “cashless”.
Currency in circulation refers to coins and banknotes used by the public to transact, settle and buy goods and services. The figure is calculated by deducting cash from banks from the currency in circulation.
It is to be noted that cash circulation in the economy continues to grow at a robust pace despite a boost to contactless digital payments during the pandemic.
A 2019 RBI study explained the phenomenon, stating “although digital payments have been growing gradually in recent years, both in value and terms of across countries, data also suggests that during the same time currency in circulation to GDP ratio has also increased in consonance with overall economic growth”.
“…an increase in digital payments to GDP ratio over a period of time does not seem to automatically imply that a fall in the currency to GDP ratio of the country” it added.
However, a recent note by SBI economists pointed out that currency in circulation declined by Rs 7,600 crore in the Diwali week, the first such drop in almost two decades excluding the 2009 festivities, which also saw a marginal decline due to the global financial crisis.
