The Union government on Tuesday (25 June) said that it has managed to reduce currency circulation worth over Rs 3.40 lakh crores (3408.68 billion rupees) thanks to demonetisation, which was implemented on 8 November 2016.

In a shock decision, the government of India had decided to cancel the Legal Tender Status of Rs 1000 and Rs 500 denomination currency notes on 8 November 2016.

The government listed out various objectives behind its decision - to eliminate black money, curb infusion and circulation of Fake Indian Currency Notes (FICN), thus creating a deterrence against funding terror and left-wing extremism, facilitating transition of India’s non-formal economy into a formal economy and to give a boost to digitisation of payments making India a less cash economy.

In a written submission to a question asked by Vishambar Prasad Nishad in the Rajya Sabha on Tuesday (26 June), Finance Minister Nirmala Sitharaman said that the notes in circulation as on 4 November 2016 were Rs 17.74 lakh crore which have now increased to Rs 21.71 lakh crore as on 31 May 2019.

The Union Finance Minister pointed out that notes in circulation had grown at an average growth rate of 14.51 per cent year on year since October 2014 and if the rate of growth would have followed the historic trend, notes in circulation would have increased to Rs 25.12 lakh crore as on 31 May 2019.

However the actual notes in circulation on 31 May 2019 stands at only Rs 21.17 lakh crore. The Minister attributed this to demonetisation, followed by digitisation and reduction of cash use in informal economy which has succeeded in reducing the notes in circulation by as much as 3.95 lakh crore.

The Finance Minister, quoting RBI reports, said the number of counterfeit notes detected in the banking system came down to 3,17,389 pieces in FY19 from as high as 5,22,783 pieces in FY18 and 7,62,072 pieces in FY17. She also credited demonetisation for success in curbing counterfeit currency.

The Minister also said that the demonetisation of bank notes of Rs 500 and Rs 1000 denomination resulted in significant positive impact on most theatres of violence in the country.

Since illegally held cash forms the major chunk of terrorist funding, after demonetisation, most of the cash held with the terrorists turned worthless. Demonetisation led to instant extinguishment of high quality fake Indian currency notes.

The Minister noted that that significant growth has been witnessed in digital transactions in the country post demonetisation. Growth of Digital Transactions in terms of value has increased to 188.07 lakh crore in September 2018 from 112.27 lakh crore in Nov 2016. Digital Transactions in terms of volume has increased to 241.88 crore in September 2018 from 91.83 crore.