Money Supply & First Working Group

Money
Money is one of the important macro economic variables. Currency in circulation includes notes in circulation, rupee coins and small coins. Rupee coins and small coins in the balance sheet of the Reserve Bank of India include ten-rupee coins issued since October 1969, two rupee-coins issued since November 1982 and five rupee coins issued since November 1985.

Money Supply with the Public = Notes in Circulation + Circulation of Rupee coins and small coins i.e., Governments currency liabilities to the Public - Currency returned by Pakistan - Cash in hand with banks i.e., commercial banks and state cooperative Banks - Balance of the Central and State Governments held at treasuries. Aggregate Monetary Resources = Money supply with the Public + Time Deposits with banks (including interbank time deposits with state co-operative banks)

Working Groups
The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934 The RBI has a long tradition of compilation & dissemination of monetary statistics, since July 1935. In view of the ongoing changes in the Indian economy as well as the developments in monetary sector, working groups were set up periodically to review and refine the monetary aggregates. First Working Group (1961) Second Working Group (1977) WGMS (Working Group on Money Supply (Chairman: Dr. Y.V. Reddy) (1998).

First Working Group (1961)

Appointed by the Reserve Bank of India. Working on the supply of Money. The First Working Group (FWG) regarded Narrow money as the appropriate measure of money. It used the term money for A) Currency with the Public B) Demand deposits C) Other deposits
(Assets other than currency, demand deposits, and other deposits, called as near money assets in order to distinguish them from money.)

FIRST WORKING GROUP

The First Working Group 1961 (FWG) of RBI for the first time threw light on the concept of money supply in India. The FWG emphasized the role of money as a liquid asset as well as medium of exchange. The FWG defined money supply as consisting of

(A) Currency notes and coins with the public (Public means all holders of money other than government and the banking system.)excluding the balances of central and state governments held at treasuries and cash on hand of scheduled and reporting non-scheduled banks and state cooperative banks.

 (B) The demand deposits(excluding interbank demand deposits) of scheduled and non-reporting non-scheduled banks and state cooperative banks.

(C) The other deposits held with RBI excluding the balance of International Monetary Fund. For scheduled and cooperative banks demand deposits include inter bank deposits and some other demand liabilities.

THANK YOU
Divyanshu Shukla