FESTIVE DEMAND FOR CASH TO BE NORMAL THIS YEAR

The economic slowdown has not dented festive season demand for cash. In the two weeks leading to Dussehra, currency in circulation witnessed a spurt, as it normally does during this time of the year. The demand for currencies rose in eastern India, where Durga Puja is a major festival. However, the highest demand is likely to be generated during Diwali (October 27).

In the previous years, the festival has seen a strong demand for cash and other forms of currencies. The currency in circulation largely consists of cash with public and current and savings account deposits with banks (but not terms deposits). The currency in circulation rose by 0.94% on the week ended October 11, standing at ~22.27 trillion. In the week ended October 4, it rose 0.90%. However, a week before that, it had risen only 0.06%.

The overall demand for currency has fallen in line with the slowdown in the economy. The currency in circulation rose 13.80% on a year-on-year basis, compared to 21% in the year-ago period. “Rise in cash in circulation by over 1.8% during last festive session is definitely encouraging and upcoming Diwali session will give better understanding,” said Soumyajit Niyogi, associate director of India Ratings and Research. “This strengthens the fact that the propensity to consume might have been down but not dead. Means of consumption has to be energised by way of boosting present income or future visibility of income,” he said.