Six years of 'Demonetisation: A look at effect and changes on cash transactions in the market

8th November is recorded as an important day in the history of the country's economy. On this day, six years ago, the Prime Minister of the country, Narendra Modi, announced the withdrawal of the currency of five hundred and thousand rupees. From the midnight of November 8, the notes of five hundred and thousand rupees had become history and later in circulation new pink notes of two thousand rupees and new notes of five hundred rupees came into circulation.

After some time, notes of hundred and two hundred rupees also came into circulation. Let us know how much impact the Central Government's decision of demonetisation, taken six years ago, has had on the country in the last six years. 

After demonetisation, the atmosphere of chaos persisted for a few days 

After the ban on the most used five and thousand rupee notes in the country, the first few days were difficult. A few days after the demonetisation, when the two thousand, five hundred and two hundred rupee notes were in circulation, the situation became normal. Before that people had to stand in long queues of banks to exchange their notes.

In many places, people had to face a lot of trouble on the occasion of marriage. However, once the new notes came into circulation in the market, gradually the situation became normal. After demonetisation, there has been a significant increase in the circulation of currency notes in the country. 

Despite demonetisation, there has been an increase in the currency present in the public domain

At present, the cash circulation of currency notes in the country has increased by about 72 percent. However, during this time a new trend of payment through digital and UPI also started in the country. It increased further during the Corona period and at present digital payments have become almost as normal as currency notes.

After demonetisation, there has been a big increase in the currency present in the form of cash in the public domain in the country. According to the data of the Reserve Bank of India till October 21, 2022, the currency with the public in the country has increased to Rs 30.88 lakh crore in the last six years. This figure shows that even after six years of demonetisation and increasing digital transactions, people are still using cash in a big way. 

After demonetisation, the circulation of currency notes in the country increased by 72 percent 

The currency figure of Rs 30.88 lakh crore with the public is 71.84 per cent higher than the currency level during the fortnight ended November 4, 2016. On November 4, 2016, currency worth Rs 17.7 lakh crore was present in the public domain of the country. Currency in the hands of the public refers to the notes and coins that people use to transact, conduct business and purchase goods and services. This figure is arrived at after deducting the cash in banks from the currency in circulation. 

Despite the increasing trend of digital payments, people's trust in cash remains

According to RBI data, the use of cash in the economy continues to grow despite the popularity of new and convenient digital payment options. However, first demonetisation and then during the corona pandemic, people have started using demonetisation on a large scale. 

Despite the rise in digital payments, the increase in transactions of rupees through cash

A study related to digital payments by RBI in the year 2019 has also partially confirmed this. The study said that although digital payments have been growing slowly in recent years, the currency in circulation has also registered an increase in the ratio of gross domestic product (GDP) during the same period, according to the data.

According to this, due to the increase in the trend of digital payments, the circulation of currency in the country has not decreased. According to the data, India has seen a significant increase in digital transactions after demonetisation, but it is still traditionally low in proportion to the country's GDP. 

For the first time in the last two decades, the cash in circulation decreased on the last Diwali 

In a recent note, economic experts related to SBI have said that the currency in circulation (CIC) has decreased by Rs 7600 crore during the week of Diwali. This is the biggest reduction in cash usage in the last two decades, except for the 2009 Diwali season. It is believed that this decrease in the use of cash has been registered amid the fear of recession in the global economy. 

The decision of demonetisation was taken to reduce the circulation of corruption and black money

Let us inform that on November 8, 2016, Prime Minister Narendra Modi had announced the decision to withdraw Rs 500 and Rs 1,000 denomination notes. It was said by the government at that time that this step has been taken with the aim of reducing corruption and circulation of black money in the economy.