MACRO ECONOMICS MONEY SUPPLY : DEVELOPMENTS AND FUTURE TRENDS

RISHAB GUPTA ITM, NAVI MUMBAI

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

LATEST DEVELOPMENTS IN MONEY SUPPLYItem 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

LATEST DEVELOPMENTS IN MONEY SUPPLY

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

COMPONENT OF MONEY STOCK- M3

• 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.

RESERVE MONEY •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

SOURCES2 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

Sources 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

Future Trends in Money Supply

INDIA MONEY SUPPLY M3  FORECAST 2016-2020

India Money Supply M3  Forecast 2016-2020Money 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. 

Forecast

Actual Q1/17 Q2/17 Q3/17 Q4/17 2020 Unit

Money Supply M3

121452

123895

125816

127773

129752

153012

INR Billion

India | Economic Forecasts | 2016-2020 Outlook

MONEY Actual Q1/17 Q2/17 Q3/17 Q4/17 2020Interest 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

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