Record Cash Even After 5-years Note Ban: About five years ago on November 8, 2016, the Modi government suddenly stopped the denomination of 500 and one thousand rupees notes. The government encouraged people to pay digitally. According to the government, one of the main objectives of demonetisation was to deduct cash from the system. However, it is increasing continuously even after five years of demonetisation and people had record cash in Fortnite (14 days period) ending on 8 October 2021.
Cash growing even after five years of demonetisation
Cash remains the choice of common people for transactions. In Fortnite ending on October 8, people had Rs 28.30 lakh crore in cash, which is 57.48 percent more than the cash available on November 4, 2016. This means that the cash with the people increased by 57.48 percent i.e. Rs 10.33 lakh crore in five years. On November 4, 2016, people had cash of Rs 17.97 lakh crore, which came down to Rs 9.11 lakh crore on November 25, 2016 after the announcement of demonetisation (8 November 2016). This means that there has been a 211 percent increase in cash coming from the level of 25 November 2016 to 8 October 2021. In January 2017, people had cash worth Rs 7.8 lakh crore.
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Corona increased the use of cash
The government and RBI are promoting ‘less cash society system’ and digital payments. Apart from this, restrictions have also been imposed regarding cash transactions. However, despite this, the cash in the system is continuously increasing. This accelerated further due to the Corona epidemic as more and more people started arranging cash to pay for groceries and other essentials due to the lockdown. However, according to a banker, excess cash does not present a true picture, rather it should look at the ratio of currency and GDP, which has come down after demonetisation. But this ratio has also increased. By FY 2020, this ratio was 10-12 per cent, which increased after the corona epidemic and it is estimated that by the financial year 2025, it will be 14 per cent.
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The importance of cash will remain
RBI believes that with the increase in nominal GDP, the cash in the system will also increase. The demand for cash remained high during the festive season as most of the shopkeepers depend on cash payments for end-to-end transactions. Cash is likely to continue to be important for transactions as around 150 million people do not have a bank account and more than 90 per cent of e-commerce transactions in Tier-4 cities take place in cash, compared to just 50 per cent in Tier-1 cities. Only transactions are done through cash.
(Source: Indian Express)
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