Cash with public at record high after demonetisation 

The Narendra Modi government’s demonetisation move in 2016 had two major objectives: elimination of black money and helping India take a giant step towards a cashless economy. The second objective was later modified to a less-cash economy. After the hopes of black money staying out of the system were quashed when 98.96% of the invalidated ₹1,000 and ₹500 notes returned to the central bank by the end of June 2017, it appears that now the government has failed to achieve the second objective as well.

According to data released by the Reserve Bank of India (RBI), cash remains the king in the Indian economy as the figures for both ‘currency with the public’ and ‘currency in circulation’ have exceeded the levels seen before the government’s demonetisation decision.

The data claims that the currency with public has reached a record high of over ₹18.5 lakh crore. This is more than double the total cash in circulation amounting to ₹7.8 lakh crore before demonetisation in late 2016. The currency with the public stood at about ₹13 lakh crore before the Modi government took charge in May 2014.

The total cash put in circulation by the RBI has also more than doubled to over ₹19.3 lakh crore from about ₹8.9 lakh crore post-demonetisation.

People had returned ₹15.28 lakh crore as on June 30, 2017, of the ₹15.44 lakh crore banned currency, or 98.96%, of the scrapped notes to the banking system, as per the RBI’s latest disclosure in this regard.

Earlier in April, the government had said the Reserve Bank will increase five-fold the printing of ₹500 notes to deal with cash shortages in certain parts of the country, fuelled partly by hoarding of high denomination currency. It is also being suspected that ₹2,000 notes are being hoarded as they are not coming back into the circulation fast enough.

Last year, Finance Minister Arun Jaitley defending the demonetisation decision and hailed it as a huge step to make India a cashless economy. Alleging that Congress was a losing and disgruntled party which never understood demonetisation, he had claimed that “people are understanding digitisation and this time the digital transactions doubled.”

However, the findings show that people seem to prefer cash by a long shot.

Pertinently, over 100 people lost their lives reportedly while standing in queues waiting for their turn to exchange currency notes during demonetisation. Many workers in the cash-based informal economy lost their livelihoods after the government scrapped ₹1,000 and ₹500 notes overnight.

(Translated into English by Ashutosh Sharma)