Currency in Circulation (CiC)
- December 22, 2021
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Currency in Circulation (CiC)
Subject – Economy
Context – CiC to GDP ratio remains high at 14.5% for FY21: Currency-in-circulation growth falls
Concept –
- Cash-to-GDP Ratio or Currency in Circulation (CIC) to GDP Ratio or simply currency-to-GDP ratio shows the value of cash in circulation as a ratio of GDP.
- Currency in circulation (currency with the public) comprises of:
- currency notes and coins with the public
- cash in hand with banks.
- It is a major liability component of a central bank’s balance sheet.
- As per the RBI’s definition, currency with public is arrived at after deducting cash with banks from total CiC. CIC refers to cash or currency within a country that is physically used to conduct transactions between consumers and businesses.
- The growth in CiC has fallen to 7.9 per cent (Rs 2.14 lakh crore) in November 2021 as against 22.2 per cent (over Rs 5 lakh crore) growth in the same month a year ago.
- However, more than five years after demonetisation, CiC has risen steadily every year, with the CiC to GDP ratio having now surged to 14.5 per cent in 2020-21 from 8.7 per cent in 2016-17.
- CiC to GDP ratio is now ever higher than that in the pre-demonetisation period.
- Demand for currency depends upon several macro-economic factors including economic growth and level of interest rate.