Data released by the Reserve Bank of India revealed that currency in circulation dipped for the second consequent week, proof that cash in the economy has settled at a lower level, resulting in over £23 billion, remaining with banks following demonetisation. Following the move in ovember last year, currency in circulation fell from nearly £1.78 billion to a low of £898 million in January.
The Modi government had announced multiple objectives for demonetisation - the two important ones being reducing the extent of black money in the system and, second, reduce dependence on cash for transactions by promoting digital payments. While black money was expected to decline, over 99 per cent of the currency is said to have been deposited with banks.
When the cleansing of black money seems to be sort of a failure, reducing dependence on cash appears to have been achieved. Currency in circulation at the latest level is 88 per cent of peak levels before demonetisation. The government has set a target of achieving 25 billion digital transactions per month by March 2018, and current monthly transactions are a little over 10 billion. RBI Deputy Governor Viral Acharya said one way of identifying stability in currency level was “when it bounced around its level”. “I think it is only recently that this has started happening, otherwise we have just been remonetising at an increasing rate and currency in circulation has been going up.”