Cash still remains King six years after demonetisation; circulation up 83 pc over 2016
In a written reply, Union Finance Minister Nirmala Sitharaman furnished in the Lok Sabha on December 19, 2022, the value of NiC fell over 20 per cent at end of March 2017 to Rs 13.1 lakh crore but has been on the rise since.
FollowData from the Reserve Bank of India (RBI) revealed that cash is still the king with official data showing close to doubling of cash with the public six years after the shock move to ban 86 percent of the currency in circulation. The value of the currency in circulation (or public holding of cash) stood at Rs 32.42 lakh crore as on December 23, 2022.
This compares to Rs 17.74 lakh crore worth of notes in circulation (NiC) on November 4, 2016, days before Prime Minister Narendra Modi announced outlawing of old 1,000 and 500 rupee notes to target black money and fight corruption.
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NiC fell to about Rs 9 lakh crore after demonetisation. Compared with January 6, 2017, the cash in circulation has seen a more than 3-fold or 260 per cent jump, while from November 4, 2016, it has seen about 83 per cent rise.
RBI said that almost the entire amount of currency withdrawn was turned in. The total value of notes returned by the public was Rs 15.3 lakh crore or 99.3 per cent of the total of Rs 15.4 lakh crore of notes in circulation on November 8, 2016.
This raised questions over the purpose of a shock move that triggered a sharp slowdown in the economy and put the public to hardship. The outlawed currency notes were replaced by new 500 and 2,000 rupee notes. However, the 1,000 rupee note was not reintroduced.
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The demonetisation was challenged in the Supreme Court, which on Monday upheld the legality by a majority 4:1 verdict. In a written reply, Union Finance Minister Nirmala Sitharaman furnished in the Lok Sabha on December 19, 2022, the value of NiC fell over 20 per cent at end of March 2017 to Rs 13.1 lakh crore but has been on the rise since.
It rose by 37.67 per cent to Rs 18.03 lakh crore on March 31, 2018. The value of NiC soared to Rs 21.10 lakh crore on March 31, 2019, Rs 24.20 lakh crore on March 31, 2020, Rs 28.26 lakh crore on March 31, 2021, and Rs 31.05 lakh crore on March 31, 2022. As on December 2, 2022, the value of NiC was Rs 31.92 lakh crore, almost 8 per cent more than Rs 29.56 lakh crore exactly a year back, according to her reply.
Not just the value, but also the number of notes in circulation has been on the rise - from 90,266 million pieces to 1,30,533 million as of March 31, 2022.
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The volume includes all notes in circulation. Presently, the Reserve Bank issues banknotes in denominations of Rs 2, Rs 5, Rs 10, Rs 20, Rs 50, Rs 100, Rs 200, Rs 500 and Rs 2000. The November 2016 demonetisation move, which was criticized by many experts for poor planning and execution, was to make India a "less cash" economy.
The State Bank of India (SBI) economists in a recent research report stated that the share of currency in circulation in payment systems has been declining from 88 per cent in fiscal 2015-16, to 20 per cent in 2021-22 and is estimated to go down further to 11.15 per cent in 2026-27.
(With inputs from PTI)
