Over the last 44 months, the amount of Rs 2,000 currency notes in circulation has decreased by a third in absolute numbers and by more than half in value terms, since no new indent has been put for printing since 2018-19, and notes have also been withdrawn from circulation owing to soilage.
Even while the money in circulation has increased by nearly 62 percent in the last five years, from Rs 17.74 lakh crore on November 4, 2016 to Rs 28.78 lakh crore on November 19, 2021, the share of Rs 2,000 notes in circulation has decreased.
Pankaj Chaudhary, Minister of State in the Finance Ministry, said in a written reply in the Rajya Sabha on Tuesday that, compared to 3,363 million pieces (mpcs) of Rs 2,000 denomination banknotes in circulation on March 31, 2018 — accounting for 3.27 percent and 37.26 percent of notes in circulation (NIC) in terms of volume and value, respectively — 2,233 mpcs were in circulation on November 26, 2021, accounting for 1.75 percent and 15.11 percent “The decline in circulation of Rs 2,000 notes released following demonetisation is due to no new indent being put for printing of these notes from 2018-19 onwards,” he explained. Furthermore, as notes become damaged or disfigured, they are taken out of circulation.”
He went on to say that the government decides on the printing of banknotes of a certain denomination in conjunction with the Reserve Bank of India in order to maintain the desired denomination mix for facilitating public transactional demand.
The government decided to demonetise the existing Rs 500 and Rs 1,000 banknotes on November 8, 2016, among other things, to combat black money.
Following demonetisation, a new series of Rs 500 notes and a Rs 2,000 note were launched. A banknote with a denomination of Rs 200 was afterwards released.
In another response, Choudhary informed Parliament that currency demand is influenced by a number of macroeconomic factors, including economic growth and interest rate levels. Currency demand is also influenced by precautionary demand generated by the public in FY21 as a result of Covid-19-induced uncertainty.
“A combination of increased public demand for cash and a reduction in GDP has resulted in a rise in Currency in Circulation (CiC) as a proportion of GDP from 12% in 2019-20 to 14.5 percent in 2020-21,” Choudhary explained. However, after a pandemic-driven jump to 22.2 percent a year ago, year-on-year growth in CiC has slowed drastically to 7.9% as of November, he said.