NEW DELHI: Despite a spectacular jump in digital payments, the love for cash among Indians fails to go away.
The value of total cash in circulation is nearing Rs 30 lakh crore as the latest data from the Reserve Bank of India (RBI) shows that total cash in circulation was worth Rs 29.84 lakh crore at the week ending 3rd December. This is 7.6% higher than the cash in circulation a year ago.
In terms of Cash-to-GDP ratio, this is already more than 13% of the budgeted GDP estimate of Rs 223 lakh crore in 2021-22.
The Cash-to-GDP ratio in 2020-21 was 14.41%, steadily rising from 8.67% at the end of 2016-17, the year in which Rs 500 and Rs 1,000 currency notes worth Rs 15.41 lakh crore were withdrawn from circulation.
India’s currency in circulation to GDP has crossed 12% when the government decided to demonetize Rs 500 and Rs 1,000 currency notes on Nov 8, 2016.
Even as experts try to figure out the reasons for steady growth of cash in use in the economy, RBI governor T Rabi Shankar in the post-monetary policy press briefing on Wednesday said that “cash continues to be a major instrument for very small transactions of below Rs 500.
“There is also a store of value demand for currencies,” the deputy governor reasoned.
The currency in circulation at the end of 2016-17 was worth Rs 13.35 lakh crore, and over the past 5 years, it has grown at the of 17% annually while the nominal GDP during the same time has grown at 7.7%.
Digital payments in India have become popular with UPI-based payments registering a huge surge. According to National Payments Corporation of India (NPCI), the value of monthly transactions through UPI has been around Rs 7.7 lakh crore. In 2016-17, a total value of retail transactions on UPI was a mere Rs 6,947 crore. Retail transactions worth Rs 49 lakh crore have taken place through UPI alone so far in 2021-22.