The value of the total cash in circulation has reached around Rs 29 lakh crore this year. data from reserve Bank of India shows that the cash in circulation has reached Rs 28,26,863 crore, an increase of 16.7 per cent as compared to Rs 24,20,975 crore in 2020.
The combination of higher public demand for cash and contraction in GDP has led to an increase in currency in circulation ,CIC) 14.5% as a percentage of GDP in the financial year 2020-21.
However, the year-on-year growth in currency in circulation has decelerated sharply to 7.9% by November 2021, from 22.2% a year ago, informed Minister of State for Finance Pankaj Choudhary. Parliament on Tuesday.
“The demand for money depends on a number of macroeconomic factors, including economic growth and interest rate levels. The precautionary demand generated by the public due to the uncertainties induced by the COVID-19 pandemic during the financial year 2020-21 is also an important factor in the demand for money. It is,” said Chaudhary.
However, a recent report by SBI Ecowrap shows that the currency in circulation is expected to shrink around 13.1 per cent of GDP in 2021-22.
“Our estimate also shows that people may have Rs 3.3 lakh crore in cash for precautionary purpose from FY 2011 onwards due to the pandemic. If we adjust for such currency transactions, the currency to GDP ratio for net payment purposes may actually be lower in FY2011 as compared to previous years,” he said. SBI Research The team’s report titled “A Guide to the formalization of the economy from FY18”.
Efforts to formalize in terms of currency/GDP ratio are bearing major fruits. A research report by the country’s largest lender estimates that without the pandemic’s fall in GDP, the CIC/GDP ratio would have been 12.7% in FY11, compared to 12.4% in FY11.
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