As several parts of the country struggle to find cash in ATMs, Principal Economic Advisor Sanjeev Sanyal has reassured citizens that an unusual demand for cash in the past few weeks has led to the shortage; but it is nothing to be afraid of as banknotes are being printed to meet the demand.
In an exclusive talk with Zee Business' Alok Priyadarshi, Sanyal explained that the shortage was a natural phenomenon as the demand for cash keeps changing with time. "In the past two-to-three weeks, there has been a sudden rise in withdrawals in Karnataka and Telangana," he said, adding "there is nothing to panic as plenty of cash is available with the Reserve Bank of India. We will find a solution within few days."
He agreed in part with the speculation that while currency chests are available with the RBI, they face a hindrance in reaching banks. "Normally, supply chain is maintained at a pace," he said.
"But it takes time, at least when unusual and sudden demands of cash props up. It happens across the world." However, he laid some blame of the shortage on the panic situation created by social media. "This sudden spike can also be attributed to false messages circulated over WhatsApp," he said. "The government is trying its best to inform people that there is no such problem with the banks."
Priyadarshi pointed out that the government has said the shortage is caused by local demands such as marriage season as well as state elections. "Is there any other reason behind this extraordinary situation?," he asked. "I can't comment on this," the official replied, adding, "The true cause will be ascertained after analysing date. I can just say every effort will be made to ensure ATMs across the country have more than adequate cash for you."
The conversation moved to the government's statement that it has stopped printing 2000-rupee notes for now. "It is said that these notes are being hoarded," said the journalist. "What is the government's strategy for printing these banknotes?" Sanyal replied that the large denomination banknote is rarely used in daily transactions. "At present, the RBI and Finance Ministry is paying attention to printing small notes that are used regularly. But if the 2000-rupee banknotes are being hoarded, than we will look into the issue and take possible steps to stop it."
Though the government is aware of the steps to be taken to recover notes — if they are indeed being hoarded – it is currently concentrating on supplying banknotes to ATMs at the earliest.
The current circulation of the banknotes in the country is at 18.5 lakh crore – higher than what it was prior to demonetization. "Do you think that the government's digital or cash-free economy movement has failed?" asked Priyadarshi, adding, "Is this crisis a step towards next demonetization? Sanyal explained that demand for cash increases when the economy goes up. "The landscape of our economy has changed in two years," he said, "The demand for cash will definitely increase with a positive change in the economy. If you see proportionally, then the existing use of the cash is less than it was at the time of demonetization."
He also made a case for the government's dream of a digital economy materialising by pointing out that electronic means of payment were increasing for services such as online shopping, booking tickets and filing IT returns.
Sanyal ended the interview by emphasizing the cash crunch is not a policy issue but a management one. "Right now, I cannot comment on what steps will be taken (to end the crunch) but we will look into the data to analyse the reason behind the spike. If problem is just related to transportation of the cash, we will solve it," he said.
