India’s Cash in Circulation Doubles Despite Digital Payment Growth
Despite India being a leader in digital financial transactions, cash currency in circulation has more than doubled over the last eight years. According to the Reserve Bank of India (RBI), since the demonetization of Rs 1000 and Rs 500 notes in 2016, the currency in circulation has increased substantially in India.
The cash in circulation in value terms has shot up over 100 per cent, standing at Rs 34.70 lakh crore as of September 6, 2024. Just before the demonetization, it was about Rs 16.5 lakh crore. Demonetisation in November 2016 was undertaken to weed out black money and encourage people to switch from cash to digital payments.
The RBI annual report suggested that the value of banknotes in circulation declined by 20.2 per cent after the demonetisation in November 2016, to Rs 13.1 trillion at the end of March 2017. The monthly bulletin of RBI reported that over the last four years, UPI transactions have seen a ten-fold increase in volume, from 12.5 billion transactions in 2019-20 to 131 billion transactions in 2023-24, accounting for nearly 80 per cent of the total digital payment volumes.
A recent report by PwC India suggested that digital transactions will increase from 159 billion in 2023-24 to 481 billion by 2028-29, marking a threefold growth. According to the data of NPCI, payments through UPI have increased by 45 per cent annually. The value of transactions also saw a growth of over 35 per cent, totalling over Rs 20.65 trillion. This marks the third consecutive month when total transactions crossed Rs 20 trillion.
NPCI data also showed that the average daily transaction value through UPI in July 2024 was Rs 466 million, or about Rs 66,590 crore. Compared with June, the volume of UPI transactions grew by 3.95 per cent in July, while the value of transactions increased by 2.84 per cent. In the first four months of the current fiscal year (2024-25), UPI recorded transactions amounting to Rs 80.79 trillion in over 55.66 billion transactions.
However, while UPI and other digital payment mechanisms have reduced the number of cash transactions, cash in circulation in the Indian economy has increased from 16.5 lakh crores in November 2016 to 34.7 lakh crores in September 2024. Experts believe that cash in circulation is increasing because of the growth in the economy and also because many low-value transactions are done in cash to save on GST.
Doubts Revealed
Cash in Circulation -: Cash in circulation means the total amount of money, like coins and paper notes, that people use for buying things and paying for services.
Digital Payment -: Digital payment is when you pay for things using your phone, computer, or other electronic devices instead of using cash.
Demonetization -: Demonetization is when the government decides that certain currency notes are no longer valid, like what happened in India in 2016 with the Rs 500 and Rs 1000 notes.
Reserve Bank of India (RBI) -: The Reserve Bank of India (RBI) is the central bank of India. It manages the country’s money supply and financial policies.
Rs 16.5 lakh crore -: Rs 16.5 lakh crore is a way to say 16.5 trillion rupees, which is a very large amount of money.
UPI -: UPI stands for Unified Payments Interface. It’s a system in India that allows you to transfer money between bank accounts instantly using your phone.
GST -: GST stands for Goods and Services Tax. It’s a tax you pay when you buy most goods and services in India.
