The government finally spoke out on Demonetisation after a prolonged silence, saying that the level of cash in circulation today would be far higher in the economy if it were not for Prime Minister Narendra Modi's surprise note ban. With the help of digitalisation and reduction of relative usage of cash in the informal economy, the value of notes in circulation is lower by Rs 2.93 lakh crore than what it would be without demonetisation, the Ministry of Finance said in response to a query in the Lok Sabha.
The ministry explains that the notes in circulation (NIC) had grown at an average growth rate of 14.51 per cent on-year from October 2014 till October 2016. At this rate, the NIC would have increased to Rs 25.35 lakh crore as on 25 November 2019; whereas, the actual level of the notes in circulation is at Rs 22.42 lakh crore now. It may be noted that the absolute value of currency notes in circulation has indeed risen from Rs 17.74 lakh crore as on 4 November 2016.
Other benefits of Demonetisation, as explained by the Ministry of Finance
Fake Currency: The government also said that the demonetisation led to the instant extinguishment of high quality fake Indian currency. Citing an RBI report, it said, 7.6 lakh pieces of counterfeit banknotes were detected in the banking system during FY17, 5.2 lakh pieces in FY18 and 3.2 lakh pieces in FY19.
Terrorism: Talking on another major issue to curb terrorism and left-wing extremism, the demonetisation of bank notes helped much as illegally held cash forms the major chunk of terrorist funding, which after the demonetisation, turned worthless, said the ministry.
The government had been silent on the question on demonetisation for a long time but now the Ministry of Finance has underlined the achievements of the targets on which the decision of demonetisation was based.
Prime Minister Narendra Modi decided to cancel the legal tender status of Rs 1000 and Rs 500 denomination currency notes on 8 November 2016 with objectives such as flushing out black money, eliminate Fake Indian Currency Notes (FICN), to curb terrorism and left-wing extremism, to convert informal economy to a formal economy to expand tax base and employment, and to boost digitalisation of payments to make India a cashless economy.