The initial impact of demonetisation in two charts

RBI data now reflect the initial impact of demonetisation on monetary indicators


Graphics: Prajakta Patil/Mint
Graphics: Prajakta Patil/Mint

RBI data now reflect the initial impact of demonetisation on monetary indicators. Chart 1 shows that currency in circulation plunged a huge 20.18% in the week to 18 November, after falling marginally in the previous week. This effect is likely to be even larger in the next few weeks.

Chart 2 shows how year-on-year growth has slowed in money supply (M3) and bank credit in the week to 11 November (the latest date for which data is available), while bank deposit growth has increased sharply. Note that growth in bank credit and in money supply has been slowing down even before the demonetisation was announced. These trends will be further reinforced in the next few weeks, as the deflationary shock ripples through the economy.

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