Official GDP projections are in the 7% region for 2016-17. Credit growth during the same period is well below this number.
Below are the numbers covering growth of bank deposits and credit, money supply and reserve money for the last financial year, 2016-17.
Deposits and Credit Growth
I have taken fortnightly data ending March 17, 2017 as the last data point for FY16-17, even though the last data point available is March 31, 2017. The reason is that this creates an additonal data point for FY16-17 (27 fortnights as against 26 in 2015-16), making the data strictly not comparable.
Credit grew by just 4.4% - less than half the rate in 2015-16. On November 11, 2016, three days after demonetisation came into effect, total bank credit stood at Rs 73532 bill. ; on March 17, 2017, the number was Rs 75656 bill. - an increase of just 3%.
Credit can be broken up into food credit and non-food credit. Although there was some fall in food credit going into demonetisation, the trend accelerated post-demonetisation. Food credit fell from Rs 1052 bill. on March 18, 2017 to Rs 870 bill. on November 11, 2017; then rose to cross the Rs 1000 bill. mark but fell sharply after mid-February down to the Rs 558 bill. mark on March 17, 2017! This picture was not seen in 2015-16.
Money Supply and Reserve Money Growth
Here again the cut-off fortnight for FY16-17 is March 17, 2017.
After demonetisation, money supply fell up to the Dec 23, 2017 reporting period and then rose, to end the year 7.7% higher, but siginficantly below the growth rate of 2015-16. From a peak of
Rs 17000 bill. on October 28,2016 - the last reporting period before demonetisation on November 8, 2016 - currency in circulation has come down to Rs 12,135 bill. on March 17, 2017. Demand and time deposits put together have more than comensated for the fall in currency in circulation.
Reserve money has actually fallen in 2016-17 by 13%! The fall in currency in circulation predominantly accounts for the fall in reserve money by Rs 3300 bill.
However, the fall could be a technicality. Let's look at the sources of reserve money growth (the flip side of the components of reserve money) . One of the sources is RBI's credit to banks and the commercial sector. This shows a decrease of Rs 6000 bill. - from Rs 3000 bill it became a negative Rs 3000 bill.by the end of the financial year, implying that instead of giving credit, banks and the commercial sector were putting money with the reserve bank, given their surplus liquidity post-demonetisation. So a rise in liabilities - bank deposits with RBI, a component of reserve money - is apparently instead being shown as a fall in assets on the sources side of reserve money. If this were accounted for then perhaps reserve money could have grown in 2016-17.
