6 years after demonetisation, cash in hand at 'record high'

New Delhi, November 8

Six years after the Centre demonetised high value currency notes, currency with the public has jumped to a new high of Rs 30.88 lakh crore as on October 21.

Epic failure

Demonetisation was promised to free the country of black money. But it destroyed businesses and ruined jobs. The PM is yet to acknowledge this epic failure. Mallikarjun Kharge, Congress President

Completely flawed

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It is not surprising because the logic behind the move, its design and the implementation (sudden and without preparation) were all completely flawed. Jayati Ghosh, prof of economics

However, a State Bank of India research report countered the contention by saying that cash as a percentage of the GDP had gone down.

Moreover, the share of currency in circulation (CIC) in payment systems has reduced from 88 per cent in 2015-16 to 20 per cent in 2021-22 and is estimated to go down further to 11.15 per cent in 2026-27.

Currency with public refers to notes and coins used by people to transact, settle trades, and for buying goods and services.

At Rs 30.88 lakh crore, currency with the public is 71.84 per cent more than Rs 17.7 lakh crore in the fortnight just before demonetisation took place in 2016, according to the RBI.

This has led critics, including Congress president Mallikarjun Kharge, to claim that cash usage was still substantial even six years after demonetisation.

But Soumya Kanti Ghosh, Group Chief Economic Adviser at the SBI, tweeted, “The jump in digital has significantly slowed down the growth of currency in circulation. As a percentage of the GDP, it is now at 11.8 per cent, less than 12.1 per cent in FY 2016 and significantly lower than the nominal GDP growth. Absurdity in quoting absolute numbers of CIC then and now!”

The share of digital transactions has been continuously increasing from 11.26 per cent in 2015-16 to 80.4 per cent in 2021-22. It is expected to touch 88 per cent in 2026-27, read the SBI report.

In value terms, the share of Rs 500 and Rs 2,000 banknotes together accounted for 85.7 per cent of the total value of banknotes in circulation as on March 31, 2021, as against 83.4 per cent as on March 31, 2020.

The RBI report, however, punctures Ghosh’s claim by stating that “although digital payments have been growing gradually in recent years, both in value and volume terms across countries, data also suggests that during the same time, CIC to GDP ratio has also increased in consonance with the overall economic growth”.