At Rs 30.88 lakh crore, the currency with the public is 71.84% higher than the level of the fortnight ended November 4, 2016. On November 8, 2016, Prime Minister Narendra Modi announced the decision to withdraw Rs 500 and Rs 1,000 denomination. notes with the ultimate goal of reducing corruption and black money in the economy.
The intention of this decision, which was criticized by many experts for its poor planning and poor execution, was to make India a “less liquid” economy.
According to the bi-monthly money supply data released by the RBI on Friday, the currency with the public rose to Rs 30.88 lakh crore on October 21. Central bank data for Reserve Money had put the currency in circulation at Rs 17.7 lakh crore on November 4, 2016.
Currency with the public refers to the banknotes and coins used by people to conduct transactions, settle transactions, and purchase goods and services. The figure is obtained after deducting the cash on hand with the banks from the currency in circulation.
The use of cash has steadily increased in the economy, although newer and highly convenient digital payment alternatives have become popular. The COVID-19 pandemic, which has emphasized contactless transactions, has also given these digital modes a boost.
A 2019 RBI study on digital payments had partially addressed the issue.
“While digital payments have grown steadily in recent years, both in value and volume across all countries, the data also suggests that over the same period the ratio of currency in circulation to GDP also increased in line with overall economic growth,” he said. said.
“…an increase in the digital payments-to-GDP ratio over a period of time does not seem to automatically imply a decline in the country’s currency-to-GDP ratio,” he added.
He had said that after demonetization, India had seen a significant increase in digital transactions, although the ratio of digital payments to GDP in the country had traditionally been low.
In a recent note, SBI economists said that currency in circulation (CIC) fell by Rs 7,600 crore during the week of Diwali, which was the first such drop in almost two decades if the excluded the 2009 festivities, which saw a marginal plunge due to the global financial crisis.
