Growth of currency in circulation falls steadily: Nomura
Published on Tue, Jul 05, 2011 at 16:58 | Source : Moneycontrol.com
Updated at Tue, Jul 05, 2011 at 17:08
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Growth of currency in circulation falls steadily: Nomura
Growth in currency in circulation (CIC) has been falling steadily from its peak of 21.2% year-on-year in August 2010 to a 14-month low of 15.8% in June.
Growth in currency in circulation (CIC) in India has been falling steadily from its peak of 21.2% year-on-year in August 2010 to a 14-month low of 15.8% in June.
Three pronged reasons: Slower economic activity, moderation in asset prices and higher rate of deposits offered by banks, according to Nomura India.
This is what they say in a report: "The sharp fall in CIC this year is partly due to high real deposit interest rates prompting a shift away from cash to deposits. However, the slowdown in economic activity and a moderation of asset prices are more important reasons as they have likely reduced transaction demand for money."
But why did CIC rise to a peak of 21.2% a year back?
The sharp rise in CIC last year was due to a mix of factors, observe Sonal Varma and Aman Mohunta, economists from Nomura India.
And they say, "High inflation, strong growth, low bank deposit rates and rising asset prices were cyclical factors driving increased public demand for cash from transaction and portfolio balance motives. Also, a structural driver was cash payments made to rural households (most of which do not bank) under the rural employment guarantee scheme."
