The BJP government’s note ban move in November 2016, which was followed by a push to digitisation, helped reduce the incremental growth in currency in circulation by over Rs 3 lakh crore.
The cash flow growth in the country dipped following demonetisation and surge in digital payments. The BJP government’s note ban move in November 2016, which was followed by a push to digitisation, helped reduce the incremental growth in currency in circulation by over Rs 3 lakh crore, Finance Minister Nirmala Sitharaman said in Rajya Sabha during Winter Session. From Rs 17.74 lakh crore as on November 2016, notes in circulation have increased to Rs 22.35 lakh as on 2 December, 2019. Before demonetisation, the average on-year growth rate of notes in circulation was at 14.51% from October 2014 to October 2016. Had the same growth continued, notes in circulation would have touched Rs 25.4 lakh crore according to estimates.
On the other hand, thanks to note ban, the value of digital transactions has surged 51% from Rs 2,071 crore in FY18 to Rs 3,134 crore in FY19. The volume growth of digital payments has also been on upward trend and has grown over 10 folds from February 2019 to January 2020, according to the portal DigiDhan. With less cash availability in the informal economy, digital payments witnessed a boom. The same also gave boost to digital wallets and digital payment systems such as UPI (Unified Payments Interface).
The government had banned Rs 1,000 and Rs 500 notes on 8 November 2016 with an aim to curb black money and eliminate fake Indian currency notes. The government had detected over 7.6 lakh fake notes in the banking system in 2016-17 and the same fell to about 5.2 lakh in 2017-18 and 3.17 in 2018-19, according to data by the Reserve Bank of India.
Meanwhile, Digital India initiative has also taken a toll on plastic currency with the number of debit cards in India hitting a two-year low. India had 843 million debit cards at the end of October 2019, which is now down by 15% from a year ago, according to RBI data. In November 2018, debit card in India stood at 998 million, just 2 million away from 1 billion mark. However, the UPI effect and rising digital wallet usage caused this fall in the number of functional debit cards, Worldline said in its recent report on India’s digital payments scenario.