Monday, 30 January 2017

Currency to GDP ratio to hit 9% by March

Money in circulation is rising again in India post demonetisation and at the current rate, currency-to-GDP ratio will reach about 9 per cent by March -- sufficient to stabilise economic activity. From 11.8 per cent of GDP on November 4, 2016 (pre- demonetisation), currency in circulation dropped to all-time low of 5.9 per cent on January 6; since then, it has risen for two straight weeks to 6.5 per cent as of January 20. 

This suggests that re-monetisation is progressing well, as deposits of old notes into banks (currency outflow) has stopped (the window to deposit old notes ended on December 30), while the Reserve Bank is printing new notes (currency inflow) for circulation."

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