ight years ago, on November 8, a televised address by Prime Minister Narendra Modi changed the way India looked at currency notes. That evening, he announced that ₹500 and ₹1,000 bills would no longerbe Valid, effectively rendering nearly 86 per cent ofthe cash supply invalid overnight. The demonetisation was intended to Vanquish black money, reduce counterfeit currency, curb corruption, boost digital payments, and counter terrorism. The Prime Minister emphasised that high cash circulation fostered corruption, and, obtained through corrupt means, it fuelled inflation and illicit activities. In his address to the nation, Modi said: "High circulation of cash also strengthens the hawala trade, which is directly connected to black money and illegal trade in weapons.," So, eight years on, how do things look?
What happened to cash Cash remains integral to the economy and continues to circulate widely. From around ₹16.63 trillion in 2015-16 (FY16) before demonetisation, it initially fell to ₹13.35 trillion in FY17, but in subsequent years rose to touch approximately ₹35 trillion in FY24.
The cash-to-GDP ratio fell from 11.9 per cent in FY16 to 8.5 per cent the following year, then rose to 14.2 per cent in FY21 before falling to nearly 12 per cent in FY24. GDP is short for gross domestic product, which is the monetary value ofall goods and services produced in a country during a specified period.
Arun Kumar, former professor of economics at Jawaharlal Nehru University in New Delhi, says an economy can neverbe truly cashless, because people hold it for numerous reasons. During uncertain times, they tend to hoard even more. "To say that more cash means an economy is generating more black money is not correct," he says.
Bharatiya Janata Party (BJP) national spokesperson Gopal Krishna Agarwal, however, opines that cash- to-GDP ratio is not an important factor. More important point is the number of digital transactions, according to him.
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