After the governments’ surprise decision to withdraw high-denomination bank notes of Rs 500 and Rs 1,000 from market, the currency in circulation reduced by 50 basis points in the week ended November 11, 2016, and the currency in circulation during the week under review declined by Rs 9,700 crore to Rs 17,87,700 crore, compared to the previous week. As per the Reserve Bank of India’s (RBI) data the bankers' deposits with RBI during week under review rose to 4500 crore to 4,41,000 crore as compared to the previous week.
However, as per the RBI’s data on reserve money, during the week ended November 4, the currency in circulation had grown by Rs 20,100 crore to Rs 17,97,400 crore and during the week ended October 28, the stock of currency in circulation had risen by Rs 18,200 crore to Rs 17,77,300 crore. On November 8 mid night, the government had announced the demonetisation move and asked people to deposit Rs 500 and Rs 1,000 old notes in their bank accounts or exchange them at bank counters before December 30, 2016.
The small business such as roadside restaurants, vegetable vendors and grocery stores were impacted due to the shrinking currency in circulation, as their mode of transaction is cash. Further, daily labourers, too, were rendered jobless as construction and other activities came to a standstill in view of cement, sand and other supplies not coming in. Vegetable and fruit wholesale markets, as well as foodgrain mandis in many parts, also reported very low business due to a shortage of cash. Even big hotels and malls reported a drop in footfall as out-of-cash public decided to skip them.
