State of Currency Circulation in India

Pre Demonetization, total Rs 17,54,000 crore worth of notes was in circulation. On Nov 8th when the govt announced that Rs500 and Rs1000 rupee notes will not be legal tender anymore the high denomination notes are replaced with Rs500 and Rs2000 rupee notes. 86% of the total old currency in circulation removed from the system. So far 60 lakh depositors put Rs 7 lakh cr in banks since Nov 8

However the newly printed currency is circulated in a reduced quantity. As per the RBI data, current cash circulation has been bought down to less than Rs 10,00,000 crores.

Cash to GDP Ratio

India has the highest currency-GDP ratio among BRICS (Brazil, Russia, India, China, South Africa) nations. Pre Demonetization India has a cash to gdp ratio of 12.25%. Even countries like Japan, Hong Kong, Switzerland have high cash to gdp ratios.

RSS Ideologue Mr S Gurumurthy said that high cash to gdp ratio resulted in asset inflation however there is no much improvement in the m3 money supply. Black money has strongly contributed to the asset inflation.

Image Source : Bloomberg Quint

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