The shocker of an announcement of the ban of currency notes in the nation happened exactly a year from today. Yet it seems that the tremors it sent to the core of socio-financial circles are still making some ripples.
Demonetisation is a watershed moment in Indian history, which affected all people without any difference.
Finance Minister Arun Jaitley recently quoted extensive data to make a case for the announcement by Prime Minister Narendra Modi’s proclamation aiming to put 86% of the currency out of circulation.
Jaitley said the note ban had achieved its objectives of reducing the cash component in the economy, widening the tax net, exposing unaccounted wealth and reducing anonymity of cash. The FM also rejected criticism of ‘tax terrorism’ that followed demonetisation and the goods and services tax. “A more efficient system to check evasion is a fair and honest system. It can’t be a terrorism system. An efficient system enables us to check evasion. It only enables us to ensure people pay what they have to pay.”
On November 8, 2016, Prime Minister Narendra Modi had announced a surprise withdrawal of Rs 500 and Rs 1,000 notes – which constituted 86% of cash in circulation at the time – a move he said would help weed out corruption, curb money laundering, and help in removing black money and counterfeit notes from the system.
A year after the government annulled high-denomination currency notes, subsequently replacing them with new notes, the total currency in circulation remains 9% less in value terms. As per the data released by RBI, currency notes totalling Rs 16.35 lakh crore in value are in circulation (as of October 27, 2017), comprising 91% of the Rs 17.97 lakh crore on November 4, 2016, before demonetisation.
Following the decrease in note availability all transactions were shifted to digital payments over the time. It substantially made a contribution in increasing the online transactions when compared to the pre-demonetisation level.
Although there is a 6% increase in the value of digital payments recorded in October 2017 (Rs 99.3 lakh crore) over November 2016 (Rs 94 lakh crore), there monthly variations are fluctuating.
Digital payments increased in value by 11% in the month immediately after demonetisation – from Rs 94 lakh crore in November 2016 to Rs 104 lakh crore in December 2016. Yet, they declined by 7% in January 2017 and 11% in February 2017 over December 2016, surged 62% (Rs 149.5 lakh crore) in March 2017 over February 2017, and declined 27% in April 2017 over the preceding month.
In terms of number, digital transactions increased 29% to 863.9 million in October 2017, up from 671.5 million at the end of November 2016. As per the recent monetary reports on the currency in circulation before demonetisation, GDP was 12%, which is now below 10%.
The various banks have also noted an increase in credit and debit card usage over the past year, when compared to the previous. Now how long will it take for a complete recovery is what we should be looking out for.
Source: Business Standard