Reserve Bank of India (RBI) figures show ₹32.18 lakh crore currency in circulation now in India, almost double the ₹17.97 lakh crore of currency in use just before demonetisation in November 2016, senior advocate P. Chidambaram submitted before a Constitution Bench on Thursday.
Appearing before a five-judge Bench led by Justice S. Abdul Nazeer, Mr. Chidambaram was countering the government's argument that demonetisation was a “transformational economic policy step” which led to a phenomenal growth in digital transactions.
The government claimed that the withdrawal of ₹500 and ₹1,000 banknotes, which had at the time formed more than 80% of the currency in circulation, was a “critical” part of a policy push to “expand formal economy” and thin the ranks of the informal cash-based sector.
The Ministry had said, post demonetisation, the volume of digital payment transactions had increased from 1.09 lakh transactions of value of ₹6,952 crore in the entire year of 2016 to 730 crore transactions of the value of more than ₹12 lakh crore in the single month of October 2022.
Quoting RBI figures to make his point, Mr. Chidambaram said “in times of distress the people fall back on currency”.
“It is completely wrong to say advanced countries have become cashless… currency in circulation has increased. Since 2016, currency represented an overwhelming or large part of payments. There is more cash with the people… That is economic logic,” the senior advocate led submissions for petitioners who have challenged demonetisation in 2016.
Six years since demonetisation, cash with public at record high of ₹30.88 lakh crore
He said as GDP grew, there would be more people with more income. There would be a requirement for more currency.
“That is why the right to issue currency is given to one independent authority, the RBI, which has a huge section which researches and decides what is the cash in circulation that people need to carry out their daily activities,” Mr. Chidambaram submitted.
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