Q. Consider the following:
  1. Growth rate of the economy
  2. Replacement demand
  3. Reserve stock requirements
  4. Budget Allocations to various department
Which among the above are used by RBI to estimate the demand for banknotes?

Answer: 1, 2 & 3
Notes:
  1. Growth rate of the economy - Higher GDP growth requires more currency in circulation.
  2. Replacement demand - Old, soiled banknotes need to be replaced regularly.
  3. Reserve stock requirements - RBI needs to maintain an adequate reserve stock for distribution.
  4. Budget Allocations to various departments - This does not directly impact banknote demand.