5 years after demonetisation, the currency in circulation continues to rise

Five years down the line after the demonetisation, the currency in circulation (CiC) and currency with the public - both indicators of digitisation - have not gone down at all.

Ever since the turn of the decade, 2016-17 - the year in which demonetisation was announced - happens to be the only year in which CiC and currency with the public have witnessed a drop in comparison with the immediately preceding financial year.

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Each of the years between 2011-12 and 2015-16 saw the CiC growing at an average rate of 11-12% each year. While 2016-17 saw the number shrinking by 20% over 2015-16, the immediately succeeding FY 2017-18 saw the CiC growing by 39% over 2016-17.

The growth rate between 2018-19 and 2020-21 is also back to averaging about 15% each year.

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In fact, India's cash-to-GDP ratio in 2020-21, which shows the currency in circulation as a proportion of the country’s GDP, stands at an alarming 14.45% - the highest for India in the last decade and higher than many other leading economies.

“The ratio of cash to GDP in most OECD countries is less than 5%, but the same in India today is around 14%. This is too high, but at the same time, showcases the massive scope of growth that players in the FinTech space can cash in on, in the near future”, Rajesh Bansal CEO of RBI Innovation Hub (RBIH) had said during the Global FinTech Festival held in September 2021.

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