Currency notes in circulation have continued to climb five years after demonetisation, albeit at a slower rate. According to an RBI analysis, demonetisation has made India a less cash-based economy.
There were Rs. 16.41 lakh crore worth of notes in circulation at the end of the financial year 2015-16, representing a YoY increase of 14.51 percent over 2014-15. By the end of 2020-21, the total value of notes in circulation will have risen to Rs.32.62 lakh crore. However, by the end of 2021, it had dropped to Rs.28.26 lakh crore.
The Indian government planned to remove the Legal Tender Status of Rs.1000 and Rs.500 denomination currency notes five years ago on, with the greater goal of moving India from a tax non-compliant society to a compliant society.
The Narendra Modi Government had decided to cancel the Legal Tender Status of Rs 1000 and Rs 500 denomination currency notes on 8th November 2016 with several objectives: (i) flushing out black money, (ii) eliminate Fake Indian Currency Notes (FICN), (iii) to strike at the root of financing of terrorism and left wing extremism, (iv) to convert non-formal economy into a formal economy to expand tax base and employment and (v) to give a big boost to digitalization of payments to make India a less cash economy.
Following the withdrawal of the then prevailing Rs 500 and Rs 1,000 notes as part of demonetisation, the government had introduced a new Rs 2,000 currency notes as part of re-monetisation. It also introduced a new series of Rs 500 notes. Later, a new denomination of Rs 200 was also added.
