Lok Sabha Question No. 173 (STARRED), answered on 2023-03-13
Subject: Cash Circulation and Demonetization
Ministry: FINANCE
Asked by: Uttam Kumar Nalamada Reddy

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS LOK SABHA STARRED QUESTION NO.173 TO BE ANSWERED ON 13.03.2023

Cash Circulation and Demonetization

## *173. SHRI UTTAM KUMAR REDDY NALAMADA:

Will the Minister of FINANCE be pleased to state:

- (a) the quantity and the ratio of cash in circulation to the GDP of the country during each of the last ten years; (b) the value and the volume of bank notes in circulation during the same period; (c) whether the demonetization was implemented in 2016 to reduce the amount of relative cash in circulation in the country and if so, the details thereof and if not, the objective of demonetization undertaken in 2016; (d)  whether  the  Government  is  aware  of  the  fact  that  there  exists  a  link  between  the amount of cash in circulation and the level of corruption and inflation in the country and if so, the details thereof and the reaction of the Government thereto; and (e) the reasons for the increase of cash in circulation in the country? ANSWER

FINANCE MINISTER (SMT. NIRMALA SITHARAMAN)

(a) to (e) :  A statement is laid on the Table of the House.

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STATEMENT  REFERRED  TO  IN  REPLY  TO  LOK  SABHA  STARRED QUESTION NO. 173# RAISED BY SHRI UTTAM KUMAR REDDY NALAMADA, HON'BLE MEMBER OF PARLIAMENT TO BE ANSWERED ON 13.03.2023 REGARDING 'CASH CIRCULATION AND DEMONETIZATION'

- (a) As per the data published in Reserve Bank of India's Annual Reports, currency (Bank Notes & Coins) in circulation (CiC) and ratio of CiC to GDP of the country for each of the last ten years are given as under:
- $: GDP figures used in this table are on 2011-12 base, which are the latest available estimates. GDP refers to GDP at Current Market Prices.
- *:  March  31,  2017,  over  April  1,  2016,  barring  Reserve  Money  (RM)  and  its components.
- **: Data pertain to March 25, 2022
- (b)  As  per  the  data  published  in  Reserve  Bank  of  India's  Annual  Reports,  volume  and value of Notes in Circulation (NiC) for last ten years are given as under:

| Year        | CiC Value (in crores)   | CiC-GDP Ratio $ (%)   |
|-------------|-------------------------|-----------------------|
| March, 2013 | 11,80,100               | 12.0                  |
| March, 2014 | 13,00,200               | 11.6                  |
| March, 2015 | 14,48,300               | 11.6                  |
| March, 2016 | 16,63,300               | 12.1                  |
| March, 2017 | 13,35,200               | 8.7*                  |
| March, 2018 | 18,29,318               | 10.7                  |
| March, 2019 | 21,36,736               | 11.3                  |
| March, 2020 | 24,47,280               | 12.2                  |
| March, 2021 | 28,53,733               | 14.4                  |
| March, 2022 | 31,33,691               | 13.7**                |

| Year        | Volume (in lakhs)   | Value (in crores)   |
|-------------|---------------------|---------------------|
| March, 2013 | 7,35,170            | 11,64,800           |
| March, 2014 | 7,73,300            | 12,82,900           |
| March, 2015 | 8,35,790            | 14,28,900           |
| March, 2016 | 9,02,660            | 16,41,500           |
| March, 2017 | 10,02,930           | 13,10,200           |
| March, 2018 | 10,23,951           | 18,03,709           |
| March, 2019 | 10,87,594           | 21,10,892           |
| March, 2020 | 11,59,768           | 24,20,975           |
| March, 2021 | 12,43,671           | 28,26,863           |
| March, 2022 | 13,05,326           | 31,05,721           |

(c)  The  mission  of  the  Government is to  move towards a less cash  economy to reduce generation and circulation of black money and to promote digital economy. As stated in the Gazette notification S.O. 3407 (E) dated November 08, 2016, issued by Government of India, the objectives of withdrawal of legal tender character of specified bank notes are as under:-

(i)  to  contain  the  rising  incidence  of  fake  currency  notes  of  the  specified  banknotes which were largely in circulation.

(ii)  to  limit  the  usage  of  high  denomination  banknotes  for  storage  of  unaccounted wealth.

(iii) to contain the rising level of using fake currency for financing subversive activities like drug trafficking and terrorism.

(d) Inflation is influenced by several factors including cash in circulation.  Reserve Bank of  India,  through  its  Monetary  Policy  Committee,  takes  necessary  steps  to  keep  the inflation within tolerance band of 2% to 6%.

(e) The volume and value of banknotes to be printed each year is decided for meeting the demand for banknotes  due to  GDP growth,  inflation,  replacement  of  soiled  banknotes; reserve stock requirements; growth in non-cash modes of payment, etc.

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