The Boss Is Always Right

It was early April 2016 - 2nd April 2016 to be precise.

The Business Section of The Times of India screamed "Mystery surge in cash with public hurts banks". Read the news here if you missed it.

The news article highlighted that the cash in circulation in India was on the upswing. As on March 2016, the cash with the public in India was approx 15.9 Lakh Crore rupees, much higher than 13.86 Lakh Crore rupees a year earlier. 

The reporter contemplated several reasons for the increase. Possible reasons cited include :- a string of public holidays, increase in demand for gold, and reduction in deposit rates (making the public averse to keeping funds with the banks).

An expert proclaimed, "Gold demand has risen because of low interest rates, and since a large part of the transactions in the yellow metal takes place in cash, there has been an increase in currency with public."

But the quality of the news reporting and expert analysis has degraded in the past few years. Be it politically biased opinions, or poorly researched content, it has been a downhill climb. (P.S. Slides are unintended, Climbs are intentional !)

And a few days later, the top economist in the country, Dr. Raghuram Rajan, the Governor of the Reserve Bank of India joined the "cash in the country" party. 

Raghuram Rajan

Reporters quizzed him for the reason behind the 16% year-on-year cash-in-circulation growth in FY16, the highest after fiscal 2011. And Rajan is known to be frank speaker. 

Without mincing words, he hit the nail on the head and said, "We see (sic) possibility that around election time cash with public increases. You can guess the reason why. We can also guess. We see that (surplus currency) not only in the states going for elections but also in the neighbouring states.There is something there. We need to understand it better."

That's about Rs. 50000 crore to Rs 60000 crore additional money in circulation. (Read more here)

The boss knows the business best. The boss is always right !