In the country where a sweeping demonetisation policy crippled the economy and left many poor people even poorer, the agonies don’t seem settled yet. Indeed, almost a year and a half after Narendra Modi’s demonetisation of the 500 and 1,000 rupee notes, ordinary citizens are still struggling to get access to cash. Protests have been organised across the country and rumours are spreading about the imminent bankruptcy of certain banks that could lead to bailouts using customer savings. Other reasons for the surge in demand for cash could also be linked to payments to farmers, as the crop season continues, and upcoming elections in some states.
The Minister of Finance, Arun Jaitley, vowed to tackle the problem quickly. He tried to reassure the public by saying that the government has a sufficient amount of cash in stock and that banknote production speed has been raised at the country’s four printing plants to meet unusual.
The Financial Times states that “currency in circulation increased by almost $7bn in the first 13 days of April” and although it is back to pre-demonetisation levels, “cash-to-GDP ratio remains lower at 10.9%, compared with 12% before the cash ban”.
Also speaking for The Financial Times, Ambit Capital’s Chief Executive Saurabh Mukherjea explains this extraordinary surge as a natural reaction to Modi’s radical measure: “It’s a natural process. You artificially took people’s money by diktat and put it in the bank. Now people have been given a chance to take the money out of the banks and turn it into cash and they have done so”.