The Reserve Bank of India said it was conscious of certain immediate difficulties that the public could face due to the currency demonetisation, and all efforts were being made to minimise and mitigate them.
The central bank said it had supplied more bank notes to the public in the period from November 10 to December 5 than it did in the whole of the past three years, even as it underscored that the hoarding of notes was not helping anybody’s cause.
The RBI statement comes in the wake of public criticism of a shortage of currency notes following the demonetisation of ₹500 and ₹1,000 notes with effect from November 9. The old (demonetised) notes that have been tendered back as of December 6 were of the order of ₹11.55 lakh crore. The RBI, it said, has supplied bank notes of various denominations worth ₹3.81 lakh crore.
RBI Governor Urjit Patel said, “Over the last two weeks, we have recalibrated our production towards the ₹500 and the ₹100 notes, and once that happens, the circulation of ₹2,000 will also go up. And we will see the benefits of those in the coming days as the supplies reach the banks. Some of these concerns will be alleviated in a practical sense rather than just a theoretical sense.”
The central bank said the demonetisation move could have short-term disruptions in economic activity in cash-intensive sectors such as retail trade, hotels and restaurants and transportation.
“Downside risks in the near term could travel through two major channels — short-run disruptions in economic activity in cash-intensive sectors such as retail trade, hotels and restaurants and transportation, and in the unorganised sector; and aggregate demand compression associated with adverse wealth effects,” said the RBI. After factoring in the expected loss of growth momentum in the third quarter and the waning effects in the fourth quarter alongside the boost to consumption demand from higher agricultural output and the implementation of the 7th Central pay commission award, the RBI has revised down the gross value added (GVA) growth for 2016-17 from 7.6 per cent to 7.1 per cent.
According to the RBI, the outlook for GVA growth for 2016-17 has turned uncertain after the unexpected loss of momentum by 50 basis points in the second quarter and the effects of the withdrawal of demonetised (₹500 and ₹1,000) notes, which are still playing out.