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Charts & Analysis

Currency Notes In Circulation Shows Lowest Growth in 6 Years

In a conversation with @eyeofsiva and @rajivanand on twitter today, there was a discussion about cash in the system:

“Currency with the public” is the total amount of currency notes printed minus what’s there with banks. This is effectively money that is not in the banking system, but has been printed by RBI so this is, to the banking system, “leakage”.

India typically sees a high growth in the currency numbers, with year on year growth as high as 24% in 2008. (We’ve seen higher figures earlier but let’s ignore that for now).



Growth though has been dropping. From 2011, the year-on-year growth of currency notes with the public has fallen to 9.5%. Even in absolute terms, like Siva says above, thenumber has flattened.

And, like Rajiv says, we seem to see flattish growth in the first half of the year (pink background) and rising cash in the last half.

I wonder if the pattern repeats going forward.

  • Mehul says:

    Why is the blue ‘growth’ line so squeaky withing a year span? This is true for almost every month. If we zoom in to a year, these zig zag is monthly? What gives?

  • Rahul Chokshi says:

    Rise in CiC is also a function of concurrent increase of the asset with RBI to print the money. While since beginning of the RBI balance sheet year we are net negative flow in FX and OMO of sub-INR 225 bn, the head room is also restricted. Its a chicken and egg thing that in times when FX is flat, RBI do OMO to improve liquidity which simultaneously give leeway to print money or does RBI print money with OMO support and simultaneously improve liquidity. But as rajeev said second half will have leakage than 10% nominal rise in CiC for FY14 can mean that if FX is flat (if not negative) than huge OMO (INR 700-800 bn) can unfold in next 6 months.

  • Pradeep N says:

    Does this have an influence on the CPI or food the inflation? Can we expect a decline in that too? Is this anyway linked to it? As in rural India, i assume most of the transactions are on cash.

  • Nerus says:

    In the context in which you have used it, it is not “lesser cash”, it is “less cash”.
    “Lesser cash” means something else.
    – Grammar Nazi.