Demonetisation made India lesser cash-based economy

New Delhi: Five years after the demonetisation, currency notes in circulation continue to rise albeit at a slower pace. Demonetisation has also made India a lesser cash-based economy, based on an RBI study. 

At the end of financial year 2015-16, Rs. 16.41 lakh crore worth of notes were in circulation, registering an YoY growth of 14.51 percent over 2014-15. At this rate, notes in circulation would have been increased to Rs.32.62 lakh crore by end of 2020-21. However, it increased to much less, Rs.28.26 lakh crore by the end of 2021. 

November 8, 2021 marked five years since the Indian government decided to cancel the Legal Tender Status of Rs 1000 and Rs 500 denomination currency notes with a larger purpose to move India from a Tax Non-compliant society to a compliant society.

The Narendra Modi Government had decided to cancel the Legal Tender Status of Rs 1000 and Rs 500 denomination currency notes on 8th November 2016 with several objectives: (i) flushing out black money, (ii) eliminate Fake Indian Currency Notes (FICN), (iii) to strike at the root of financing of terrorism and left wing extremism, (iv) to convert non-formal economy into a formal economy to expand tax base and employment and (v) to give a big boost to digitalization of payments to make India a less cash economy.

Following the withdrawal of the then prevailing Rs 500 and Rs 1,000 notes as part of demonetisation, the government had introduced a new Rs 2,000 currency notes as part of re-monetisation. It also introduced a new series of Rs 500 notes. Later, a new denomination of Rs 200 was also added.