Five years of demonetisation: Cash transactions decline but not gone; digital payments on rise
Five years back on November 8, 2016, Prime Minister Narendra Modi appeared on national television and said all Rs 500, Rs 1,000 high value notes will turn invalid by midnight which aimed at flushing out money hidden from the income tax department, known as black money.
Five years after the demonetisation on November 8, the ratio of currency in circulation as a proportion of GDP touched a new high of 14.5% for fiscal 2020-21. Though cash use has declined over the years, it still plays a major role in various transactions. Digital payments have been on the rise, however, banknotes in circulation went up in the last financial year as many people opted for the precautionary holding of cash amid the Covid-19 pandemic disrupting normal lives and economic activities in varying degrees.
A survey by LocalCircles, a community platform, has found for every two out of three participants, cash transactions accounted for less than 25 per cent of their total transactions, and that over the last year, 20 per cent reduced their cash transactions in favour of digital payments.
The survey is based on responses from 36,000 people across 388 districts registered with the LocalCircles platform, of whom, 44 per cent were from Tier 1 districts, 33 per cent from Tier 2 districts, and 23 per cent from Tier 3 and 4 and rural districts.
Five years back on November 8, 2016, Prime Minister Narendra Modi appeared on national television and said all Rs 500, Rs 1,000 high value notes will turn invalid by midnight which aimed at flushing out money hidden from the income tax department, known as black money. This led to nearly 86 per cent of the currency in circulation becoming invalid by midnight, without providing for adequate replenishment.
All economic agents were given a limited time window to deposit their existing notes with banks and replace those with new notes. This created a huge pressure on the banking system. The move, known as demonetisation, caused a lot of confusion and large swathes of people were forced to form serpentine queues before banks to exchange notes.
The three main economic objectives of demonetisation were fighting black money, fake notes and creating a cashless economy by pushing digital transactions.
Meanwhile, Trinamool Congress leader Derek O'Brien on Monday tweeted that only Mamata Banerjee got it spot on Prime Minister Narendra Modi's sudden demonetisation move or ban on high-value currency notes in 2016.