t’s going to be at least two weeks before you can stop worrying about empty ATMs
India may need an additional Rs 70,000-1 lakh crore to meet the cash demand of a growing economy and it may take at least two weeks to print that much currency, according to estimates by leading economists. But the current cash shortage in some parts of the country may be overcome sooner as the Reserve Bank of India and banks gear up to plug gaps in cash-supply logistics.
Economists suggest that the country needs at least Rs 19.4-20 lakh crore in public hands and ATMs.
Currency with public is currently at Rs 17.5 lakh crore while Rs 1.2 lakh crore is estimated to be the current value of digital transactions, resulting in a gap in circulation.
“The shock in November 2016 has still not been fully reversed, with currency in circulation still below its long-term trend,” said Axis bank chief economist Saugata Bhattacharya.
Based on the nominal GDP growth of 10.8% in FY18, currency with public was expected to be at Rs 19.4 lakh crore by March. But there was a gap of Rs 1.9 lakh crore, research from State Bank of India shows. “The rise in digital modes of payment compensates in some part for the existing gap. The shift to digital mode could be at least Rs 1.2 lakh crore. The apparent shortfall thus could be around Rs 70,000 crore or even less,” SBI’s group chief economic adviser Soumya Kanti Ghosh said.
The government announced it would increase printing of Rs 500 notes by five times to meet the shortfall. India has four security printing presses while the presses in Mysuru and Salboni, run by RBI’s wholly owned subsidiary Bharatiya Reserve Bank Note Mudran Pvt Ltd, print Rs 500 note.
Both the presses can print 1,600 crore pieces of banknote every year if they work in two shifts.
Given the estimated gap of Rs 70,000 crore and assuming that the entire gap will be met by pumping Rs 500 notes only, the country would require about 140 crore additional banknotes in circulation.
The two currency presses in Mysore and Salboni would need at least two weeks to print those.