The Reserve Bank of India released its Annual Report for the financial year 2016-17 which ended on June 30, 2017. The document talked about demonetisation and price levels, along with prospects for the coming year.
Here's few points that the Annual Report stressed on:
Most of the demonetised notes are back
Data in the RBI Annual Report showed that out of the Rs 15.44 lakh crore of notes taken out of circulation in November last year, Rs 15.28 lakh crore has returned to the system and around Rs 16,000 crore is yet to be deposited back to the banks.
Former Attorney General Mukul Rohatgi had told the Supreme Court that only 70 per cent of demonetised notes are expected to come back to the system.
The document also mentioned that around demonetised currency notes of Rs 1,000 worth Rs 8,900 crore have not come back into the system yet. There were 632.6 crore pieces of Rs 1,000 currency notes in circulation on the day of demonetisation.
More counterfeit notes detected
According to the RBI, detection of counterfeit notes was 20.4 per cent higher than the previous year. A total of 762,072 pieces of counterfeit notes were detected in the banking system during financial year 2016-17. Out of these fake notes, 95.7 per cent were detected by commercial banks.
Except Rs 100 currency notes, the detection of counterfeit notes increased across all other denominations - notably, 500 and 1,000 - during 2016-17. As per RBI data, the rate of fake Indian currency notes detected per million pieces of notes was 7.1 pieces for Rs 500 notes and 19.1 pieces for Rs 1000 notes.
Currency notes to have new designs
The RBI Annual Report stated that new design notes in other denominations are due for phased introduction. The central bank has already issued Rs 500 notes with new designs after demonetisation last year, and new design Rs 50 notes earlier this month.
These new notes were issued with serial number from the Mahatma Gandhi new series. RBI also issued Rs 2000 notes after demonetisation and Rs 200 notes recently with serial number from the same series.
People to spend more
Talking of prospects for the coming year, the RBI report speculated that both rural and urban parts of the country are expected to see high demand values on account of several factors.
With normal southwest monsoon likely this year, policy initiatives of the government - for example, hike in maximum support prices (MSP), and increasing crop insurance coverage are likely to help in boosting crop production. The resultant increase in rural income is likely to boost rural consumption demand, said the document.
Purchasing power has increased in urban scenarios too. Implementation of new rates of House Rent Allowance as per recommendations of the Seventh Central Pay Commission for central government employees has contributed to this. Several state governments have also hiked salaries of their employees, or are about to, in accordance to the new pay panel. According to the report, this will again improve urban consumption demand.
Food prices to remain low
With a normal monsoon expected to keep agricultural production up to mark this year, food prices will not rise by much. The increased purchasing power of people is also expected to keep inflation figures under check.
In the previous financial year, inflation rose in the first four months due to an upsurge in food prices. A normal monsoon however brought inflation figures down, starting August 2016, which got accentuated by falling food prices, especially those of vegetables, in the wake of demonetisation in November 2016.
Rapid disinflation in the food group drove down headline inflation month after month - barring February and March - to a low of 1.5 per cent in June 2017. Eventually, the year 2016-17 ended up with a subdued inflation of 3.6 per cent in Q4 falling short of RBI's projection of 5.0 percent.