Mumbai: The circulating currency ratio as the highest proportion of GDP is only 14.5% for fiscal 2020-21.
The surge comes when a pandemic increases the demand for cash and shrinks GDP.
At the same time, the surge in every form of digital payment continues on the five-year anniversary of the five demonetization – whether it is an integrated payment interface (UPI), credit and debit card or fastag – shows that shifts to digital and cash intensity.
Not mutually exclusive.
The increase in post-pandemic currencies in the circulation has become a global phenomenon, described as a ‘hyphen to cash’ under extreme uncertainty.
It has been experienced by the US, Spain, Italy, Germany, France, Brazil, Russia and Turkey.
Meanwhile, digital payments are almost three times the FY18.
The Digital Bank Reserve Bank of India payment index, which has in 2018 as the year of the base of 100, has increased to 270.
The index also captures digital deployment, taking into account the growth of payment infrastructure.
Of the four main objectives of demonetization, India seems to have done it well on three.
There has been an increase in digital transactions.
In addition, there is also a decrease in counterfeit currencies.
Fake records detected continued to drop from 310,000 in TA19 to 290,000 on FY20 and 200,000 on FY21.
There are also indications that the economy is increasingly formalized.
According to the Head of SBI Economist Group Soumya Kanti Ghosh, there is an indicator that the informal economy has shrunk to 20% of GDP from 40% a few years ago.
This is comparable to Europe and is far better than Latin American countries where the informal economic size is estimated at 34%.