Nearly three weeks after the demonetisation move, India has only been able to replace about 10.5 per cent, or ₹1.5 lakh crore, worth of cash put out of circulation by the government's demonetisation move, which withdrew currency worth about ₹14.18 lakh crores, says a Credit Suisse report.
Citing the Credit Suisse research dated Nov 25, an Indian Express report says it could take "several months" before the Reserve Bank of India is able to replace the displaced value of money put out of circulation in the economy.
Out of the new currency that has been introduced, a big chunk has been in the new ₹2,000 currency notes, which have been hard to transact in, given the cash shortage of lower denominated notes, worsening the current cash crunch.
India is estimated to have only about ₹2.2 lakh crores worth of lower denomination notes left over after the withdrawal of the higher notes that made up only about 14 per cent of the total value of money in circulation before the move.
So far, RBI has been able to print 150 crore individual notes mostly in high value currency of ₹2,000. It will need to print at least 1,000 to 2,000 crore notes of the new ₹500 notes to restore "normal transaction volumes," said the report.
Separately, research from ICICI Securities states that RBI's printing presses would need to work at 150 per cent of their currency capacity to normalise the cash crunch before January. At their current capacity of 100 per cent, normalcy is at least another four months away.
"The requirement of notes could be higher if normal demand for currency picks up as and when the government relaxes withdrawal limits and more ATMs become operational," ICICI says.
A lack of money in circulation is likely to put a dampener on the economy, and consumer demand in the short to medium term, with some estimates predicting that India's GDP growth could pull back by as much as four percentage points.