RBI data shows demonetisation had little impact on reducing cash in circulation
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Mains·
Digital payment growth vs physical cash trends: a key GS3 Economy and Digital Infrastructure case study.
Why in news
RBI data indicates that demonetisation had little impact on reducing cash in circulation while UPI transaction values grew steadily as a percentage of GDP.
Background
The RBI report shows an increase in the detection of counterfeit notes, specifically ₹500 notes, following the demonetisation. It also highlights a steady annual growth in the value of transactions on the Unified Payments Interface (UPI) relative to India's GDP.
Facts for Prelims
- FactRBI data shows little impact of demonetisation on reducing cash in circulation
- FactDetection of counterfeit notes, especially ₹500 notes, has increased
- FactUPI transaction values grew steadily each year as a percentage of India's GDP
Prelims practice question
With reference to the RBI report on demonetisation and digital payments, consider the following statements:
- Demonetisation significantly reduced the total amount of cash in circulation.
- UPI transaction values have shown steady annual growth as a percentage of India's GDP.
- The detection of counterfeit notes, particularly ₹500 notes, increased after demonetisation.
Which of the statements given above is/are correct?
- (a)2 only
- (b)1 and 2 only
- (c)2 and 3 only
- (d)1, 2 and 3
Show answer
Answer: (c) 2 and 3 only — Statements 2 and 3 are correct. Statement 1 is incorrect: RBI data shows it had little impact on reducing cash in circulation.
For Mains
Q. Analyze the shift from physical currency to digital payment systems in India and evaluate the effectiveness of demonetisation in altering cash circulation patterns.
Dimensions to cover in your answer
- Monetary policy friction: Difficulty in curbing physical cash circulation despite digital infrastructure growth
- Security oversight: Rising detection of counterfeit ₹500 notes despite demonetisation measures
- Digital penetration: UPI's role in decoupling GDP growth from physical currency reliance
Keywords: monetisation · digital infrastructure · cashless economy · counterfeit currency · payment systems
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