Cash is back as king; at record high level

A year-and-a-half after the note ban, cash circulation has returned to its peak levels despite several measures initiated by the government to increase digital transactions.

In fact, the cash availability has exceeded the pre-demonetisation levels to touch a record high of Rs 17.97 lakh crore, up 1.9% from November 2016. Prior to the note ban, the currency in circulation was pegged at Rs 17.64 lakh crore, data available with the Reserve Bank of India (RBI) shows.

On November 8, 2016, Prime Minister Narendra Modi, in his emergency address to the nation, declared that Rs 500 and Rs 1,000 notes would be invalid within four hours, sending the economy and the country into wild goose chase.

At the time of demonetisation, high-value notes constituted a whopping 85% of the total currency under circulation.

Post-demonetisation, the country reeled under a terrible cash crunch, with cash circulation going down by 51% within two months, reaching as low as Rs 8,73,402 crore as on January 6, 2017.

However, by mid-March this year, the cash in circulation has overtaken the pre-note ban levels, RBI data revealed.

Currency available with the public has also reached a record high of Rs 17,52,851 crore, up 124% from the low of Rs 7,83,257 crore as on December 9, 2016. In just a matter of one-month post-demonetisation, currency in the hands of the public had come down by 54% from Rs 17,02,210 crore.

However, rupee coins, which are issued by the government, have seen a stagnation in the past couple of months, capped at Rs 24,855 crore.

"The use of non-cash transactions in a predominantly unorganised economy is never viable. The impetus on the digital transaction was just an after thought, when all the notes were returned to the RBI," Govinda Rao, member, fourteenth finance commission, said.

Yet, woes continue

Many traders and businesses told DH that they have not seen any impact of increased circulation owing to "the trust issues with the government".

"This is the government of cronies. We don't know what is going to happen in three months time. We have trust issues also with the government, due to which the length of our trade cycles have increased," Ramesh Lahoti, Chairman-Internal Trade, Federation of Karnataka Chambers of Commerce and Industry, (FKCCI) said.