Currency in circulation 30% short of pre-demonetisation levels, shows RBI data
New Delhi: Currency in circulation in India stood at Rs12.45 trillion as on 10 March, showed data from the Reserve Bank of India. Although the pace of remonetisation was quicker in the week to 10 March compared to the two previous weeks, currency in circulation is still at about 70% of pre-demonetisation levels.
On 4 November 2016, currency with the public was Rs 17.97 trillion. It had dropped to a low of Rs8.98 trillion as on 6 January following the government’s demonetisation move on 8 November—invalidating Rs1,000 and Rs500 notes which amounted to around 86% of the total currency in circulation by value.
The demonetisation move led to severe cash crunch across the country, leading to a spike in the adoption of e-wallets and other modes of electronic transaction.
The data showed that there was an increase of Rs47,410 crore in currency with the public during the week ended 10 March, compared to an average of Rs33,713 crore in the previous three weeks.
A week ago, while responding to a question in Parliament, finance minister Arun Jaitely said the RBI had been systematically injecting new currency notes of Rs 500 and Rs 2,000 denominations into the market since 8 November, the Press Trust of India reported. He had said then that around Rs12 trillion of new notes are currently in circulation, the news agency reported.
The Reserve Bank of India itself has not released any data on the number of new notes introduced since 7 December. On 18 January, central bank governor Urjit Patel told a parliamentary standing committee that Rs9.2 trillion worth of currency had been injected into the economy after the 8 November ban. So far, RBI has also not disclosed how much of old currency (in invalidated notes) had been returned to the central bank by 31 December.
To be sure, with the government’s current focus on a less-cash economy, currency in circulation might not reach 100% of pre-demonetisation levels. Analysts such as Soumya Kanti Ghosh, chief economist at State Bank of India, believe that cash with public may be capped at 10% of economic output, which works out to roughly Rs 15 trillion. That still is about Rs 2.5 trillion more than the latest data and would be reached only after 4-5 weeks at the current remonetisation pace.
Separately, earlier this week, RBI lifted all the limits on cash withdrawal from customer bank accounts that were first put in place on 8 November.