The latest Weekly Statistical Supplement of RBI says that currency with the public on November 11 was Rs 15,262.3 billion and it drastically came down to Rs 9,119.1 billion on November 25

Parsa Venkateshwar Rao Jr

One of the arguments hinted at by Prime Minister Narendra Modi in his dramatic demonetisation announcement on November 8 was that there has been an increase in counterfeit currency, black money, terror finance activities in the economy. It was implied that there was a lot of “illegal” money floating around and it was to flush this out that the drastic decision of making the Rs 500 and Rs 1,000 notes invalid currency was taken.

The Reserve Bank of India (RBI) issues a Weekly Statistical Supplement (WSS) containing different indicators of movement in the economy in terms of finances—currency flow, bank assets, foreign exchange reserves et al.

The sixth item in the WSS is about “Money Stock: Components and Sources”. One of them is the heading “Currency with the Public”. As demonetisation, which came into effect from November 9, affected currency with the public, it is revealing to watch the statistic in this regard.

In its latest issue released on December 16, WSS shows that the currency with the public on November 11 was Rs 15, 262.3 billion and on November 25 it came down drastically to Rs 9,119.1 billion. That is in the first fortnight post-demonetisation, Rs 6,143.2 billion was sucked out of the system. It would take time before the RBI can reveal as to how much of the currency available with the public on November 11 was black money or counterfeit currency.

It would also be useful to trace back the availability of currency with the public in the preceding months, right from the beginning of the financial year. The money available with the public on March 31, 2016 was Rs 15,972.5 billion.

The fortnightly figures for the following months were:

April 2016

April 1: Rs 15,961.1 billion; April 15: Rs 16,541.5 billion; April 29: Rs 16,500.4 billion

May 2016

May 13: Rs 16,781 billion; May 27: Rs 16,612.8 billion

June 2016

June 10: Rs 16,786.6 billion; June 24: Rs 16,567.5 billion 

July 2016

July 8: Rs 16,784.7 billion; July 22: Rs 16,611.4 billion

August 2016

August 5: Rs 16,643.6 billion; August 19: Rs 16, 730.4 billion

September 2016

September 2: Rs 16,600.9 billion; September 16: Rs 16,880.3 billion; September 30: Rs 16,560.5 billion

October 2016

October 14: Rs 16, 985.4 billion; October 28: Rs 17,013.8 billion.

November 2016

November 11: Rs 15, 262.3 billion; November 25: Rs 9,119.1 billion

We find that the highest figure of currency with the public was Rs 17,013.8 billion for the fortnight ending October 28 and Rs 16,985.4 billion for the previous fortnight ending on October 14.

The RBI figures indicate that the rise in the amount of currency in circulation was on the scanner as it were. Did the RBI find something alarming or unusual regarding the money in circulation, and which might have forced it to raise the alarm, and recommend to the government the remedial measure of demonetisation?

The RBI and the government will have to explain the issue after the dust of rhetoric settles down.