Five years of Demonetization

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On 08 November 2021, India completed five years of demonetization. It is worth noting that due to the last demonetization, the validity of currency notes of Rs 500 and Rs 1,000 was withdrawn.

It is noteworthy that both these currency notes were 86 percent of the currency in circulation (ie in circulation) in terms of value at that time.

Recent Findings:

  • Digital payments have become a major payment option with over 4 billion transactions in October alone.
  • The number of UPI transactions is higher in comparison to card transactions and prepaid payment instruments.
  • The share of high denomination notes, which stood at over 86% before demonetization (Rs 500 and Rs 1,000), currently stands at 85.7% (Rs 500 and Rs 2,000).
  • Due to the global pandemic, there has been an annual contraction of 3% in India’s nominal GDP. This has led to an increase in the cash-GDP ratio, which has increased the priority of cash in the Indian economy.
  • The cash-to-GDP ratio or the ratio between currency in circulation (CIC) and GDP, shows the value of cash in circulation as a ratio of a country’s GDP.
  • When the ratio between currency and GDP starts increasing or becomes higher, it simply means that economic transactions in the informal sector have started regaining momentum.

Source – The Hindu

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