‘Cashless Economy’: Almost 20% More Cash in Circulation Today Than Before Demonetisation
An all-time high of Rs 21.41 lakh crore of currency was in circulation as on March 15, 2019.
Cash circulating in the economy today has risen by 19.14 per cent when compared to pre-demonetisation numbers, according to Reserve Bank of India (RBI) data. The primary takeaway from this is that the Narendra Modi-led Bharatiya Janata Party (BJP) government’s objective for the November 8, 2016, policy indecision — the implementation of a cashless/digital economy through demonetisation — has failed. The earlier excuse given by PM Modi for the discontinuation of Rs 500 and Rs 1,000 notes was the elimination of black money.
In a report for the Indian Express, George Matthew writes that an all-time high of Rs 21.41 lakh crore in currency was in circulation as on March 15, 2019, compared to the pre-demonetisation number of Rs 17.97 lakh crore on November 4, 2016. Despite the rise in digital transactions, Currency in Circulation (CIC) increased by over Rs three lakh crore in the last one year from Rs 18.29 lakh crore in March 2018, the report said.
CIC had fallen to around Rs 9 lakh crore in January 2017, after Rs 500 and Rs 1,000 notes were withdrawn from the system in November 2016. Indian Express reported that cash in the system has been steadily rising even though both, the government and the RBI, pushed for a “less cash society”, digitisation of payments and slapped restrictions on the use of cash in various transactions. It added that with Lok Sabha elections at the doorsteps, the currency in circulation is expected to rise further.
Reasons for the rise in cash:
According to the Indian Express report, the reserve money growth was driven primarily by the expansion of currency in circulation as the pace of remonetisation quickened. Cash transactions through ATMs also rose. From Rs 2,00,648 crore in January 2017, debit card transactions through ATMs and point of sale (PoS) terminals rose to Rs 316,808 crore in January 2019.
The report states that heightened economic activity starting with the fourth quarter of the 2018 financial year has meant that the demand for working capital cycle has resulted in more usage of cash for transactional purposes.
More cash to come:
The Indian Express reported that with the 2019 elections on the cards, currency in circulation is expected to rise further.
Bankers told Express that cash in the system normally increases before the elections. Currency demand also increases after the monsoons, as harvesting begins in October followed by Rabi sowing, eventually giving rise to cash requirement. The festive season also entails more cash demand, due to more people buying gold and cars.
CPI (M) leader Sitaram Yechury said on twitter, “Demonetisation by Modi on a whim, against all advice from RBI, was a way to whitewash black money. We know how jobs and lives were destroyed by notebandi. Now claims like “cashless” economy also has turned out to be false and misleading Jumlas.”