Currency in circulation Jumps to Rs 21.75 lakh crore by April 12 amid poll season
New Delhi: Currency in circulation in the system stood at Rs 21.75 lakh crore as on April 12. It rose by Rs 37,830 crore since the beginning of the current financial year as compared to a reduction of Rs 4,883 crore in the last three weeks of March since the dates for the ongoing general election were announced on March 10.
This incremental amount of currency in circulation in the first two weeks of the current financial year is more than double in March, probably because of poll-related expenses, the Economic Times said in a report. Higher spending by the government after it held back towards the end of the last fiscal year, could be another reason behind this high currency in circulation, the ET report said citing economists.
Economist said some element of seasonality is there in the growth in currency in circulation, which typically picks up in the beginning of any financial year since in the last few weeks of a year as both banks and the government want to show their kitty full.
An analysis of the currency in circulation in the past one year shows that between May and November 2018, the growth in currency circulation was Rs 92,000 crore, but it almost doubled to Rs 1.8 lakh crore between December and April 1.
“Pickup in currency demand since November could be due to a combination of factors such as festival demand and pickup in demand due to seasonal factors and also partly due to the elections,” an economist with a local bank told the business daily.
Though historically there has been an element of cyclicality in currency growth, it was expected that the government’s push towards digitisation after it banned Rs 500 and Rs 1,000 notes in November 2016, will reduce the circulation of cash in the system.
According to the ET report, a longer term analysis of data indicates that cash in the system tends to rise sharply in the run-up to general elections. However, 2013-14 was an exception. Once elections are over, currency in circulation is expected to fall.
