MUMBAI: Unbelievable, but just a year after demonetisation, high-value notes have touched a whopping 93 per cent of total currency in circulation. This is not only higher than the pre-DeMo levels of 86.4 per cent, but also the first time that high-value notes crossed the 90 per cent mark in 15 years.
Here’s the math. As on December 8, total currency in circulation is Rs 16,82,510 crore. As per the information provided by the Finance Ministry to Parliament last week, the RBI printed Rs 15,78,700 crore worth Rs 2,000 and Rs 500 notes as on December 8 — translating to 93 per cent of the total currency in circulation. If you consider notes in circulation (excluding coins), it’s 97 per cent!
Though it appears that reliance on high denominations is back, defeating the purpose of the note ban, analysts say this is temporary considering the RBI’s ongoing work on getting the right currency mix.
Typically, the RBI maintains an inventory and may not pump all that it prints. As per SBI Research’s Chief Economic Adviser Dr Sowmya Kanti Ghosh’s calculation, the RBI hasn’t supplied about 16 per cent of the printed notes yet.
The central bank did not respond to an email seeking comment. But sources confirmed to Express that Rs 2,000 and Rs 500 notes comprise the bulk (read over 90 per cent) of total bank notes in the system and small-value denominations account for less than 10 per cent currently.
But the biggest puzzle is, if the central bank is beginning to gradually phase out the Rs 2,000 note, introduced to ease cash shortage last year. As on March, 2017, there were 3.2 billion pieces of Rs 2,000 notes in circulation, while December data showed a mere 11 per cent increase in printing. The thrust was on Rs 500 notes, the value of which shot up an eye-popping 188 per cent between March and December.
From 5.8 billion pieces in March (in circulation), printing touched 16 billion as on December 8. In value terms at Rs 8,47,800 crore, Rs 500 notes account for 50 per cent of the total currency. This is also the first time that Rs 500 notes crossed the 50 per cent mark since 2002, when the Rs 1,000 denomination was introduced.
“Printing of Rs 2,000 notes may have been a judgment taken at that time. Today changing the note is a challenge...The fact that Rs 200 notes are also being printed could be a way out to first provide change for Rs 2,000 notes and also address cumulative inflation where a Rs 100 note doesn’t fetch goods of daily consumption,” said Madan Sabnavis, chief economist at Care Ratings.