If there was any doubt about the failure of demonetisation in terms of one of its key purposes - to push India towards a cashless economy - the latest RBI data lays it to rest. According to the apex bank, currency with the public (CwP) has reached a record high level of over Rs 18.5 lakh crore, more than double from the low of about Rs 7.8 lakh crore it had hit post-demonetisation in late 2016. At the same time, the total currency put in circulation by the RBI has also jumped about 44 per cent to Rs 19.3 lakh crore in the same period.
In fact, both figures have even exceeded the levels seen before the government's surprise decision on November 8, 2016, to scrap the Rs 500 and Rs 1,000 banknotes, which saw nearly 86 per cent of the currency in circulation at that time being invalidated overnight. The public at the time had been given a grace period till December 30, 2016 - till June 30, 2017, for non-resident Indians - to deposit the invalidated notes in banks. As per the RBI's latest disclosure in this regard, people had returned Rs 15.28 lakh crore, or 98.96 per cent of the scrapped notes, to the banking system as on June 30, 2017.
While the RBI is yet to announce its final word on processing and verification of all the returned notes, the latest 'money supply' data from the central bank puts the CwP at over Rs 18.5 lakh crore as on May 25, 2018, up 31 per cent from year-ago level. For the record, CwP is a term referred to as people's demand for cash, and is arrived at after deducting the cash with banks from the total currency in circulation.
In terms of 'currency in circulation', the RBI puts the latest figure at over Rs 19.3 lakh crore as on June 1, 2018, a jump of about 30 per cent from the year-ago level, according to the 'reserve money' data released by the central bank. The pre-demonetisation figure stood at Rs 17.9 lakh crore as on November 5, 2016.
The RBI publishes the figures for currency in circulation on a weekly basis, while the CwP figures come out every fortnight. An analysis of historic data shows that the latter stood at about Rs 13 lakh crore before the Modi government took charge in May 2014. It rose to over Rs 14.5 lakh crore in a year, jumping further to around Rs 16.7 lakh crore by May 2016. The figure crossed Rs 17 lakh crore level by October that year, before starting to decline due to demonetisation. But by February 2017, CwP jumped up to over Rs 10 lakh crore and crossed the Rs 15 lakh crore mark last September.
A similar trend was seen in the figures for currency in circulation, which dropped sharply from November 2016 till early January 2017 due to demonetisation, before starting to go up. The total money supply, described as M3 by the RBI, now stands at over Rs 140 lakh crore - nearly 11 per cent higher than the year-ago level. It stood at about Rs 120 lakh crore during the demonetisation period and was below Rs 100 lakh crore level before the Modi government came to power. This includes currency with the public, deposit money of the public (demand deposits with the banking system plus 'other' deposits with the RBI) and the time deposits with the banking system.
Ironically, despite this high level of currency available with the public, the country had faced a severe cash crunch in various states a few months ago and the ATMs had run dry again, reminiscent of the post-demonetisation days. It was speculated that hoarding or accumulation of large amounts of cash for various reasons could have triggered this artificial currency crunch. In response, the government had announced that printing of Rs 500 notes would be stepped up.
With PTI inputs