As per the RBI annual report 2020, released in August 2020, currency circulation increased in the past few months, touching the pre-demonetisation level with the protracted lockdowns prompting residents to stock up on cash for stockpiling groceries and other essentials. It further stated that the year ended with a surge in pandemic-related rush to cash. Overall, growth in currency circulation of 14.5 per cent in FY20 was slightly lower than 16.8 per cent a year ago.
However, the currency-GDP ratio increased to its pre-demonetisation level of 12 per cent in 2019-20 from 11.3 per cent a year ago, indicating the rise in cash-intensity due to the pandemic. Growth in currency accelerated from 11.3 per cent as on February 28 to 14.5 per cent at the end of March, and to 21.3 per cent by mid-June. However, bank credit remained largely stable through the Covid-19 outbreak.
Cross-country monetary statistics of 2020, sourced from the IMF, indicate that the increase in currency circulation was particularly sharp in Brazil, Chile, India, Russia, and Turkey, as also in advanced economies, such as the US, Spain, Italy, Germany, and France, where the use of cash is usually less. They were also impacted by the Covid-19 build-up of precautionary balances.
Courtesy: The Economic Times