Despite the government pushing for a ‘cashless’ economy and digitization of payments, currency in circulation (CIC) is at a record high of Rs 21.41 lakh crore. And what is surprising is that this is from the pre-demonetization level of Rs 17.97 lakh crore on November 4, 2016.
According to the Reserve Bank of India (RBI)’s latest data, CIC has increased three-fold, Rs. 3 lakh crore in the last one year from Rs 18.29 lakh crore in March 2018. CIC had fallen to about Rs 9 lakh crore in January 2017 following the withdrawal of Rs 500 and Rs 1000 notes.
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The government had termed demonetization as a ‘masterstroke’ to destroy black money. It had claimed that this would also be a major blow against corruption and counterfeiting and would almost-immediately kick start India’s digital cashless world. But cash has been steadily rising. While the government still blows its demonetization burgle, experts say the economy took a beating for the worse. Huge financial losses have been incurred and the marginalized poor were hit the most.
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The rising cash in circulation can be attributed to the immediate introduction of Rs 2000 note. Moreover, counterfeits were also detected in the newly printed currency. ATM withdrawals picked up pace when currency was freely available again. PwC’s July 2018 report on ATMs in India shows that from April 2017 to March 2018, the average month-on-month growth in ATM transaction values was 1.16 per cent, compared with 1.04 per cent from May 2014 to October 2016 (pre-demonetization). RBI data shows that CIC grew by 37 per cent in 2017-18, and the currency to GDP ratio increased from 8.8 per cent to 10.9 per cent.
Experts say cash in the system normally increases before the elections. The demand for currency also increases after the monsoons as the harvesting begins in October followed by Rabi sowing, giving rise to cash. The festive season also pulls and drives cash. Hard cash remains to be in demand and is the King.