Read the following figures on the sources of change in the monetary base of India (Rs crore):
| Year | Currency in circulation | Cash with banks | Currency with the public |
|---|---|---|---|
| 2015-16 | 16,63,463 | ||
| 2016-17 | 13,35,266 | ||
| 2023-24 | 35,11,461 | 1,01,185 | 34,10,276 |
Statement I: In 2023-24, currency in circulation was equal to cash with banks plus currency with the public.
Statement II: Currency in circulation was lower in 2016-17, the year of demonetisation, than in 2015-16.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both Statement I and Statement II are true.
Statement I: In 2023-24, currency in circulation was equal to cash with banks plus currency with the public. — True. 1,01,185 + 34,10,276 = 35,11,461, which is the currency in circulation. Currency in circulation is held either by banks or by the public.
Statement II: Currency in circulation was lower in 2016-17, the year of demonetisation, than in 2015-16. — True. It fell from 16,63,463 to 13,35,266. Old Rs 500 and Rs 1000 notes stopped being legal tender in November 2016, so currency in circulation shrank.
NCERT (2026-27): “Box No. 3.2: Demonetisation Demonetisation was a new initiative taken by the Government of India in November 2016 to tackle the problem of corruption, black money, terrorism and circulation of fake currency in the economy. Old currency notes of Rs 500, and Rs 1000 were no longer legal tender. New currency notes in the denomination of Rs 500 and Rs 2000 were launched. … There were long queues outside banks and ATM booths. The shortage of currency in circulation had an adverse impact on the economic activities. However, things improved with time and normalcy returned.” |