7 years after demonetisation, cash circulation in economy nearly doubles to 33 lakh crore: Survey

Seven years after demonetisation, UPI (Unified Payments Interface) and other digital payment mechanisms have reduced the number of cash transactions, but cash in circulation in the Indian economy has nearly doubled, a survey has found. The survey also found that 76 per cent of those who bought a property in the last 7 years had to pay a component of the price in cash.

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Demonetisation, announced in November 2016, was undertaken to weed out black money and nudge people to change their method of payment from cash to digital.

In May 2023 for instance, UPI accounted for over 78 per cent of total retail digital payments in India, according to the survey conducted by LocalCircles. Experts project that it is likely to reach 90 per cent of total retail digital payments in India by FY 2026–27, the survey added. "Similarly, the recently launched Central Bank Digital Currency (CBDC) also has the potential to change the way people transact digitally."

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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 17 lakh crores in November 2016 to 33 lakh crores in October 2023, the survey said.

"Cash is still being used heavily in big-ticket transactions, especially property transactions with the survey finding that 76 per cent of those who bought a property in the last 7 years had to pay a component of the price in cash," the survey said. In fact, it added, the cash component in property transactions is once again rising as this year only 24 per cent indicated that they did not have to pay cash as against 30 per cent of respondents two years back.

The survey said that most household purchases of high value be it a vehicle or a gadget were now happening digitally and with a receipt which was a positive change. However, the survey found that most consumers were still using cash to pay for groceries, eating out, and food delivery as well as when it came to paying for services like household help, home repairs, personal services, repair of white goods, etc.

"The community feedback indicates that for groceries, eating out, household help payments convenience is the driver while for services taxable at 18 per cent GST rates, it is the taxation that is driving vendors and consumers to transact in cash."