According to an India Spend analysis of Reserve Bank of India data, India’s currency stocks have not kept pace with the Indian need for cash, and there are no reserves that allow the country to cope with sudden spikes in demands, such as those that led to recent shortages in many states.
These currency stocks were planned to be adequate if PM Modi’s plan that Indians will adopt more of digital transactions, but since demonetization, the plan has not gone as was planned.
According to April 18, 2018, report from the State Bank of India (SBI), India’s largest bank, Currency with the Indian public was Rs 1.9 lakh crore lesser than it should have been in March 2018, The bank’s chairman denied any such shortfall on April 17, 2018, an indication of the political sensitivity of the issue.
Digital transactions did rise since then, but after a peak of Rs 149 lakh crore (in value) in March 2017, they have fallen 22% to Rs 115 lakh crore in February 2018–although they rose consistently by volume–implying that Indians are either not willing or unable to give up cash in a country where the connectivity to the banking system is limited, and illiteracy or the inability to use digital means are widespread.
As we said, digital transactions have consistently risen by volume. Post demonetization, provisional data suggest that transactions have seen a considerable increase, reaching over 1,122 million transactions in January 2018, an all-time high since November 2016, down 2% in February 2018.
The cash crunch surely brought middle-class households into standstill, as there are many services and products that cannot be bought online or through digital transaction. This is an annoying situation and is strengthening the anti-Modi wave.
Banks should take the relevant measures and make sure that there is enough currency in circulation. Nothing seems to be going right for the government and this crisis has added to the havoc. After Indians have survived the twin terrors of Demonetization and GST, surely they are not ready or willing to take any more of inconvenience and are up in arms against the government.
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