There is more currency in the Indian economic system right now than there was on the eve of the demonetisation announcement two years, Reserve Bank of India data shows. The data also shows that the currency in circulation is currently growing at a rate of 22.2 per cent year on year.
This is over four percentage points more than 2016’s growth rate of 17.7 per cent.
Another data set shows in the period after demonetisation digital transactions such as bank transfers and debit-credit card payments have grown manifold in the two years since.
An increased reliance on digital means for making payments and moving India towards a less cash economy were among the stated goals of the demonetisation exercise.
The exercise was announced by PM Narendra Modi this day two years ago when the prime minister appeared on television screens at 8pm on November 8, 2016.
In his surprise primetime address, PM Modi said that his government to invalidate, or demonetise, all the Rs 500 and Rs 1000 notes that were in circulation then. They amounted to around 85 per cent of all banknotes that were in circulation then.
The Rs 500 note would be replaced with a new note while the Rs 1,000 note would be replaced with a higher-denomination Rs 2,000 note, PM Modi announced.
Demonetisation would kick in from that midnight, the prime minister, adding that citizens would get around 50 days to exchange their old notes.
- In the 14 days before November 8, 2016 — when demonetisation was announced — cash worth Rs 17.01 lakh crore was in circulation in India.
- In the 14 days before today, i.e. November 8, 2018, cash worth Rs 18.76 lakh crore was in circulation in India, according to RBI data.
- The data also shows that while in 2016, the currency in circulation was growing at 17.7 per cent year on year, in 2018 it has registered a higher 22.2 per cent year on year growth.
On the flipside, digital transactions have gone up significantly.
- The value of National Electronic Funds Transfer (NEFT) payments has gone from Rs 1.25 lah crore in 2015-16 to Rs 1.95 lakh crore in 2017-18.
- Immediate Payment Service (IMPS) payments have gone up five-fold, from a combined Rs 22,000 crore in 2015-16 to more than Rs 1 lakh crore in 2017-18.
- Real Time Gross Settlement (RTGS) transactions have similarly gone up from Rs 824 lakh crore to over Rs 1,167 lakh crore.
All three — NEFT, IMPS and RTGS — are electronic payment systems.
- Card payments (debit, credit and prepaid instruments and wallets) have also registered a growth during the same period. The value of these payments went from Rs 4.48 lakh crore to Rs 10.6 lakh crore.
2 YEARS OF DEMONETISATION
In the two years since the demonetisation announcement, the government has come under sharp criticism from all Opposition political parties as well as some renowned economists.
The attacks continued today with former PM Manmohan Singh calling the demonetisation exercise “ill-fated and ill-thought”.
“It is often said that time is a great healer. But unfortunately, in the case of demonetisation, the scars and wounds of demonetisation are only getting more visible with time,” Singh said in a strongly-worded statement.
“Today is a day to remember how economic misadventures can roil the nation for a long time and understand that economic policymaking should be handled with thought and care,” Singh said.
The government fielded Finance Minister Arun Jaitley to defend the exercise. In a Facebook blog, Jaitley called demonetisation a “key step in a chain of important decisions to formalise the economy”.
Jaitley said that “confiscation” of cash (read: black money) was never demonetisation’s goal. “Getting it into the formal economy and making the holders pay tax was the broader objective,” Jaitley said as he called the criticism of the demonetisation exercise “ill-conceived”.The criticism Jaitley referred has to do with the questions that were raised after the RBI disclosed that nearly all of the invalidated Rs 500 and Rs 1,000 had returned to the system in the days following demonetisation.