Six years after DeMo, Sitharaman accepts less cash economy is still a dream

Nirmala Sitharaman said in the Lok Sabha The mission of the government is to move towards a less cash economy to promote digital economy response to a question posed by MP N Uttam Kumar Reddy on demonetisation

Hyderabad: Six years after the BJP-led Centre’s flawed demonetization move that triggered long queues, acute cash shortage and the death of several small businesses, union Finance Minister Nirmala Sitharaman acknowledged that the value of currency in circulation (CiC) had more than doubled to Rs.31.33 lakh crore in March 2022 from Rs.13 lakh crore in 2014, which meant the purported objective of a less cash economy had failed.

The CiC, which includes bank notes and coins, to GDP ratio stood at 11.6 per cent as on March 2014. After declining to 8.7 percent in March 2017 following demonetization, the cash to GDP ratio shot up to 13.7 per cent as on March 25, 2022.

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Similarly, the volume of Notes in Circulation (NiC) also increased significantly from 7.73 lakh in March 2014 to 13.05 lakh in March 2022, without witnessing any decrease even during the demonetization era.

Demonetization was aimed to reduce black money by reducing cash in circulation. After demonetization was announced, the CiC had dipped to Rs.13.35 lakh crore by March 2017 from Rs.16.63 lakh crore as of March 2016.

However, it continued to grow rapidly from Rs.18.29 lakh crore in March 2018 to Rs.21.36 lakh crore and Rs.24.47 lakh crore in March 2019 and March 2020 respectively. At the end of March 2021 and 2022, it further shot up to Rs.28.53 lakh crore and Rs.31.33 lakh crore, respectively.

Sitharaman, replying to a question raised by Congress Lok Sabha member N Uttam Kumar Reddy, said the objective of demonetisation announced on November 8, 2016, was to contain fake currency notes, to limit the usage of high denomination banknotes for storage of unaccounted wealth and to contain the rising level of using fake currency for financing subversive activities like drug trafficking and terrorism.

“The mission of the government is to move towards a less cash economy to reduce generation and circulation of black money and to promote digital economy,” Sitharaman informed the Lok Sabha on Monday, thus acknowledging that the objective of demonetization was not yet achieved as the CiC has more than doubled in just five years.

Reacting to the Centre’s response, Uttam Kumar Reddy said the BJP government had finally admitted its failure in achieving all the objectives of demonetization implemented in November 2016. The statistics pertaining to CiC and the value of NiC provided by the Finance Minister clearly showed that none of the objectives of demonetization was achieved by the Modi government, he said.