Latest developments in money supply after demonetisation and what are the expected future trends in money supply.

1. MONEY SUPPLY : DEVELOPMENTS AND FUTURE TRENDS
RISHAB GUPTA
ITM, NAVI MUMBAI

2. Money Supply M3 in India increased to 121452.41 INR Billion in January from 120449.46 INR Billion in
December of 2016. Money Supply M3 in India averaged 21070.30 INR Billion
LATEST DEVELOPMENT IN MONEY SUPPLY

3. Item
Outstanding
as on
Variation
over
2016 2017 Week
Financial
Year so far
Year-on-
Year
2015-16 2016-17 2016 2017
Mar. 31 Jan. 27 Amount % Amount % Amount % Amount % Amount %
1 2 3 4 5 6 7 8 9 10 11 12
Reserve
Money
21,807.4 14,971.7 311.8 2.1 771.2 4.0 –6,835.7 –31.3 2,270.4 12.8 –5,084.1 –25.3
1
Components
(1.1+1.2+1.3)
1.1 Currency
in Circulation
16,634.6 10,167.2 292.4 3.0 1,358.7 9.4 –6,467.4 –38.9 1,788.8 12.7 –5,674.6 –35.8
1.2 Bankers'
Deposits with
RBI
5,018.3 4,651.1 21.4 0.5 –575.1 –12.4 –367.1 –7.3 433.0 11.9 570.6 14.0
1.3 ‘Other’
Deposits with
RBI
154.5 153.4 –1.9 –1.2 –12.4 –8.5 –1.1 –0.7 48.6 57.3 19.9 14.9

4.  Current money supply in market decreased from 16634.6 on
march 31st 2016 to 10167.2 billions on 27th Jan 2017. This is due to
the affect of demonetisation.
 Even the Deposits of Banker’s with RBI also reduced to 4651.1
Billions on 27th Jan 2017 from 5018.3 on 31st march 2016

5. • Time deposit of commercial bank & cooperative bank (
excluding inter bank deposit)
• It includes net bank credit to government +bank credit to
commercial sector + net foreign exchange assets +
government currency liability to the public.

6. •It is also called as high powered
money, base money and central
bank money.
•Reserve money =
Currency in Circulation + Bankers’
Deposits with RBI + ‘Other’
Deposits with RBI

7. 2 Sources
(2.1+2.2+2.3+
2.4-2.5)
2.1 Net RBI
Credit to
Government
4,250.0 2,102.5 711.7 495.1 –2,147.4 –427.1 –2,037.8
2.1.1 Net RBI
Credit to
Centre
4,245.6 2,084.3 712.4 528.0 –2,161.3 –422.2 –2,054.0
2.2 RBI Credit
to Banks &
Commercial
Sector
3,045.4 –2,471.4 –410.0 –456.9 –5,516.7 849.6 –4,039.5
2.2.1 RBI's
Net Claims on
Banks
2,844.5 –2,519.0 –408.3 –378.1 –5,363.6 839.6 –4,017.5
2.3 Net
Foreign
Exchange
Assets of RBI
23,834.8 24,659.5 92.6 0.4 2,217.4 10.4 824.7 3.5 3,323.0 16.5 1,169.3 5.0
2.4
Government’s
Currency
Liabilities to
the Public
219.1 246.2 – – 20.8 10.7 27.1 12.4 24.3 12.8 31.0 14.4
2.5 Net Non-
Monetary
Liabilities of
RBI
9,541.7 9,565.1 82.5 0.9 1,505.3 19.2 23.4 0.2 1,499.5 19.1 207.1 2.2

8.  2.1 Net RBI Credit to Government
 2.1.1 Net RBI Credit to Centre
 2.2 RBI Credit to Banks & Commercial Sector
 2.2.1 RBI's Net Claims on Banks
 2.3 Net Foreign Exchange Assets of RBI
 2.4 Government’s Currency Liabilities to the Public
 2.5 Net Non-Monetary Liabilities of RBI

10. India Money Supply M3 Forecast 2016-2020
Money Supply M3 in India is expected to be 123895.37 INR Billion by
the end of this quarter, according to Trading Economics global macro
models and analysts expectations. Looking forward, we estimate
Money Supply M3 in India to stand at 129752.43 in 12 months time. In
the long-term, the India Money Supply M3 is projected to trend around
153012.28 INR Billion in 2020, according to our econometric models.
India Money Supply M3 Forecasts are projected using an
autoregressive integrated moving average (ARIMA) model calibrated
using our analysts expectations. We model the past behaviour of
India Money Supply M3 using vast amounts of historical data and we
adjust the coefficients of the econometric model by taking into
account our analysts assessments and future expectations. The
forecast for - India Money Supply M3 - was last predicted on Saturday,
February 4, 2017.
Forecas
t
Actual Q1/17 Q2/17 Q3/17 Q4/17 2020 Unit
Money
Supply
M3
121452 123895 125816 127773 129752 153012 INR
Billion

11. MONEY Actual Q1/17 Q2/17 Q3/17 Q4/17 2020
Interest
Rate
6.25 6 5.75 5.75 5.5 4.75 percent
Cash
Reserve
Ratio
4.00 4 4 4 4 4 percent
Interbank
Rate
6.27 6.56 6.56 6.3 6.3 5.5 percent
Money
Supply
M1
21221.30 28772 29394 30028 30660 38142 INR Billion
Money
Supply
M2
20935.37 18359 18930 17080 17706 17154 INR Billion
Money
Supply
M3
121452.41 123895 125816 127773 129752 153012 INR Billion
Foreign
Exchange
Reserves
361560.00 356869 355160 354242 353749 353178 USD
Million
Central
Bank
Balance
Sheet
23419.03 19607 19757 19794 19801 19802 INR
Billions
Loan
Growth
5.10 7 6.9 6.8 7.9 7 percent

12. THANK YOU