How sudden spike in cash demand led to a major cash crunch in many states

India’s currency stocks have not kept pace with the Indian need for cash, and there are no reserves that allow the country to cope with sudden spikes in demands, such as those that led to recent shortages in many states, according to an IndiaSpend analysis of Reserve Bank of India data.

These currency stocks should have been adequate for India’s average requirements–if Indians had adopted digital transactions at the scale Prime Minister Narendra Modi’s government envisaged after demonetisation, the controversial withdrawal of 86% of the country’s currency, by value, on November 8, 2016.

Currency with the Indian public was Rs 1.9 lakh crore lesser than it should have been in March 2018, said a April 18, 2018, report from the State Bank of India (SBI), India’s largest bank. The bank’s chairman denied any such shortfall on April 17, 2018, an indication of the political sensitivity of the issue.