Demonetisation, which was meant to get rid of black money, but later it was reported that 99% of demonetised currency came back into the financial system. Now, three years after demonestisation, report surface saying that Indian households were quick to accumulate significantly more cash after demonetisation than they previously held.
According to Hindustan Times, data released recently by National Account Statistics (NAS) shows that this as done most likely to compensate for the depletion of their cash holdings caused by demonetisation. In 2017-18, savings in currency accounted for 25% of the total gross financial savings of households.
As per the report, this was the highest since 2011-12. Correspondingly, the share of deposits in gross financial savings was 28% in 2017-18, the lowest since 2011-12. This suggests that people withdrew money from banks to keep at home.
On the other hand, the fact that the 2016-17 value for cash savings is negative means that liquidity was not restored completely until March 2017 and people still had their money caught up in banks.
According to a 2018 report from the Reserve Bank of India, approximately 99.3% of the demonetised banknotes, or Rs 15.30 lakh crore of the Rs 15.41 lakh crore that had been demonetised, were deposited with the banking system. The banknotes that were not deposited were only worth Rs 10,720 crore, leading analysts to state that the effort had failed to remove black money from the economy. The BSE SENSEX and NIFTY 50 stock indices fell over 6 percent on the day after the announcement. The move reduced the country's industrial production and its GDP growth rate.
