Cash Is Not King

Expansion of absolute cash in circulation has to be seen holistically with growth in GDP and uptick in digital transactions.

- Joe C. Mathew

Over the last five years, November 8 has become a day for NDA government’s critics to remind about the alleged harmful effects or futility of demonetisation carried out by Prime Minister Narendra Modi that day in 2016. The government had given several reasons to justify demonetisation of high-value currency notes. But one that is questioned year after year is its claim that demonetisation was aimed at reducing India’s cash economy. Looking at absolute numbers, one might think the critics have a point, as currency in circulation CIC), which was ₹16.63 lakh crore in FY16, dropped to ₹13.35 lakh crore post demonetisation) in FY17, but has been going up every year since then. In FY18, CIC was ₹18.29 lakh crore. It rose to ₹21.36 lakh crore in FY19 and ₹31.33 crore in FY22.