Indian economy is now poorer by Rs 5.8 lakh crore

The Indian economy has seen a loss of Rs 5.8 lakh crore since Prime Minister Narendra Modi announced demonetisation on November 8. Due to decline in currency in circulation and the reserve money, the economy faced such hige losses.

As per industry experts, cash crunch might also squeeze the economy further as it could lead to payment delays and defaults.

The reserve money or the high-powered money, a bulk of which comprises currency in circulation and bank deposits with the Reserve Bank of India, contracted 12.4% or Rs 2.3 lakh crore for the week ended November 25.

The currency in circulation has also decreased by 16.8% or Rs 2.4 lakh crore during the week. For the period since November 8, the total contraction in currency is estimated to be Rs 5.8 lakh crore because of scrapping of old Rs 500 and Rs 1,000 notes.

RBI, however, is now going after temporary measures of imposing a 100% cash reserve requirement on incremental deposits generated by banks since November 1, negative impact of currency contraction is likely to neutralised.
(image: IndiaTimes)