Circulation of money and smooth economic flow - Business & Economy - General Economy - TIK Share

Circulation of money and smooth economic flow


CA Pulkit Sharma

2014-12-06

In this century of financial advancement and awareness, more than 50% of Indians don’t have a bank account. Prime Minister Narendra Modi announced Jan Dhan Scheme, where account holders were given extra facilities to open the account.

India is one of the countries with highest cash transactions; these transactions not only generate black money but also block the circulation of money.  I had a discussion with Rajaneesh Garg (CA, CPA and member on Tikshare), regarding this and came up with his idea of money circulation and how cash transactions disturbs the circulation. As per him money circulation gets blocked if even a single holder blocks and does not pass the cash to next level. For example, money given as cash subsidy hardly comes back to economy.

Cash gets blocked as savings, if the same cash is deposited in bank. Banks can use the money to fund the private or government projects.

Circulation of money and smooth economic flow