By Disha Rawal
According to reports, the amount of currency in circulation in India is back to pre-demonetisation levels. Fifteen months after demonetisation, 99.17% of the original currency levels are currently in circulation. The total amount of currency in circulation amounts to Rs 17.82 lakh crore, according to the latest Reserve Bank data.
The Prime Ministers announcement that notes of Rs 500 and Rs 1000 were to be de-legalised gave a boost to the number of digitised payments made, as 86% of the currency then in circulation was suddenly taken out of circulation. This move was also helped in the fight against counterfeit notes and tax evasion. However, there are now claims that things may not be going according to plan.
Three months after demonetisation, the amount of currency in circulation dropped to 8 lakh crore. The recent recovery of the currency circulation figures is being attributed to the upcoming elections, as cash circulation tends to rise at the time of elections, and the country’s economic recovery. The second is a plausible explanation since, even though digitised transactions continue to gain ground, economic growth always brings with it a growth in cash circulation.
How digital are we?
It is also important, however, to keep an eye on the progress of digitalised financial business. A study by InterMedia found that only 0.3% of a representative sample of 45,000 Indians have ever used mobile money, and only 25% actively use a bank account. Indeed, most businesses that were affected by demonetisation still report heavy reliance on cash. A lack of content in Indic languages, a lack of internet connectivity and the high rate of illiteracy seem to be major obstacles to the growth of online transactions.
Policy changes may be needed to make government payment systems smoother. In the same survey, 88% of respondents who live below the poverty line claimed to have never received an online payment from the government, and many respondents reported having to give bribes to access their government payments. A more extensive digital overhaul may be needed to make sure that digital payment systems penetrate deeper into the Indian economy.
Featured Image Source: Flickr