Cash is still king in India, but there has been a perceptible shift in favour of digitisation in recent years, according to an internal study of the Reserve Bank of India (RBI). Having a high currency in circulation (CIC) relative to gross domestic product (GDP) is a good indicator of cash being highly preferred for payments. Based on this assumption, “India continues to have a strong bias for cash payments," the study noted.
Demonetisation and an active growth in GDP brought down the cash in circulation as a percentage of GDP to 8.70 per cent in 2016-17. This increased to 10.70 per cent in 2017-18 and to 11.2 per cent in 2018-19 which, however, is less than the pre-demonetisation level of 12.1 per cent in 2015-16.
“The rate of increase is lower, indicating a perceptible shift away from cash,” the report said.
The notes in circulation (CIC minus coins in circulation) increased at an average rate of 14 per cent between October 2014 and October 2016.