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Demonetisation ke Side Effects!!


Some back of the envelop calculations on Demonetisation

1.In terms of value, the annual report of Reserve Bank of India (RBI) of 31 March 2016 stated that total bank notes in circulation were valued to Rs. 16.42 lakh crore of which nearly 86% i.e. around Rs. 14.18 lakh crore was Rs. 500 and Rs. 1000 banknotes.

2A Rs. 4,500/- (previously Rs. 4,000/-) of Old High Denomination (OHD) Notes can be exchanged at a time. This will be reviewed after 24th November, 2016. During the 50 days window, at least two more opportunities of exchange may have to be given. Assume that 40% out of 125 Crore of population (excluding children, aged etc.) get OHD notes exchange each time. Thus, 50 Crore people X Rs. 4,500/- X 3 times = Rs. 6.75 Lakh Crore of OHD notes will get exchanged.

2B. No questions will be asked for amount upto Rs. 2,50,000/- deposited in the account of housewives. If Rs. 2,50,000/- is deposited in Bank Accounts of only 1 Crore housewives, it will result in deposit of Rs. 2.50 Lakh Crores OHD Notes.

2C. There are around 25.51 Crore Jan Dhan Accounts. If Rs. 50,000/- is deposited in half of Jan Dhan Accounts, it will result in deposit of around Rs. 6.37 Lakh Crore OHD Notes (12.75 Crore Accounts X Rs. 50,000/- per account).

3. Thus, above 3 avenues alone will be more than sufficient (6.75 + 2.50 + 6.37 = Rs. 15.62 Lakh Crore) to cater to the need of entire value of Rs. 14.18 Crore of OHD Notes.

These are only assumptions. Views are personal.

Rameshchandra Kabra 17/11/2016

 

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