What has happened?
- It has been five years since the government announced demonetisation on November 8, 2016,
- But it doesn’t seem to have yielded the results expected from it.
- Reserve Bank of India (RBI) data reveals that the currency amount with the public stood at a record high of Rs 28.30 lakh crore for the fortnight ending October 8, 2021.
- This is up 57.48% or Rs 10.33 lakh crore from a level of Rs 17.97 lakh crore on November 4, 2016.
- Cash with the public has shot up 211% from Rs 9.11 lakh crore, recorded on November 25, 2016.
- NIC had grown at an average growth rate of 14.51 per cent year-on-year from October 2014 till October 2016, the month preceding the demonetisation.
Factor on which it depends?
- During the last Parliament session, the government had said the quantum of banknotes in the economy broadly depends on the GDP growth, inflation, and replacement of soiled banknotes and growth in non-cash modes of payment.
- Barring the COVID-19-hit 2020-21 financial year, the Indian economy has recorded a positive growth rate.
How RBI calculate this data?
- The data on currency with the public is arrived at after deducting cash with the banks from total currency in circulation (CIC).
- CIC refers to cash or currency within a country that is physically used to conduct transactions between consumers and businesses.
Reason for its rise?
- One of the primary reasons is the stringent lockdown announced by the government during the COVID-19 pandemic in 2020.
- People began keeping cash with them to meet their grocery and other essential needs mostly catered by neighbourhood grocery
- The post-pandemic increase in currency in circulation has been a global phenomenon, described as a ‘dash to cash’ under extreme uncertainty. This has been experienced by the US, Spain,
- Italy, Germany, France, Brazil, Russia and Turkey.
- Moreover, cash remains a major mode of transaction with about 15 crore people in the country not having a bank account.
- During the festival season also the cash demand remains high as a large number of merchants still depend on cash payments.
But what about digital transactions?
- The digital payments are nearly three times what they were in FY18.
- The Reserve Bank of India’s digital payments index, which has 2018 as the base year at 100, has risen to 270.
- This index also captures the spread of digital, taking into account growth in the payments infrastructure.
Other impacts of demo
- Significantly Reduced Counterfeit Notes
- Formalisation of Economy Got a Boost
- All Notes Came Back to the RBI
- Failed to Unearth Black Money
- It cannot be said that cash components have been eliminated from the market.
- However, they have become a far less influential factor driving property purchases.
- A pilot survey was conducted by the Reserve Bank on retail payment habits of individuals in six cities show,
- Cash remains the preferred mode of payment and for receiving money for regular expenses.
Q) Which among the following matched incorrectly?
- Rs 50- Konark Sun temple wheel
- Rs 100- Rani ki Vav
- Rs 200- Sanchi Stupa
- Rs 500- Red Fort