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Cash in Circulation More than Doubles Since FY17 on Consumption Demand

Cash in circulation has more than doubled since 2016-17-the year of de monetization and launch of UPI despite phasing out of the 22,000 notes. HSBC PMI and CMS cash index have moved in tandem showing both cash and digital payments have seen growth underscoring the continued relevance of cash.

Currency in circulation increased from 13.35 lakh crore in March 2017 to 35.15 lakh crore as of March-end 2024. This is despite the Reserve Bank of India deciding to with draw 2,000 denomination notes from circulation from May 2023, resulting in the central bank getting 97.83% of 3.56 lakh crore worth notes back to the banking system.

While digital payments through UPI started in 2016, it gained scale only after the pandemic in 2020, rising nearly nine fold since. The value of monthly UPI transactions has soared from 22.06 lakh crore in March 2020 to a record 18.07 lakh crore this February RBI’s assessments on currency in circulation showed currency demand often tends to be higher during festivals and prior to big elections or in a year in which the agricultural sector clocks strong growth as it props cash demand from rural areas Underscoring the importance of cash in the system, CMS Info Systems which offers cash management and other business services CMS cash index has trended in line with HSBC Purchasing Managers’ Index since CMS index was launched in 2017. While CMS cash index has gone up from 100 in April 2017 to 125.6 in March 2024, HSBC PMI inched up from 100 to 117 in the same period.

The trend indicated a strong correlation between the level of economic activity and cash spends “For an economy to flourish, it is imperative that the payments ecosystem allows all modes of transaction. Cash payments are an indispensable complement to mobile, electronic, and other forms of digital payments,” said Anush Raghavan, president, cash management solutions at CMS Info Systems. This balance is especially vital for a consumption-driven economy like India where the ability to spend influences overall economic health.”

Smaller economies like Brazil, South Africa, Russia, and the UK had much lower volumes of currency in circulation (CIC). when compared to larger economies like the US, China, Japan, and India indicating the direct correlation between CIC and economic size, Raghavan said.

CMS Cash Index is a weighted index consisting of two factors cash that goes into circulation via ATM channels as replenishment and cash collected from organized retail channels post-consumer purchases. Both are covered by CMS Info Systems across cities and towns in India.

CMS Info Systems’ latest consumption report titled ‘Unfolding India’s Consumption Story 2024’ showed spends are rising in consumer durables and FMCG sector and for travel and entertainment. Delhi, Tamil Na du, Uttar Pradesh, West Bengal, and Karna taka led with the highest increase in ATM withdrawals for spends in FY24.

S-ET Image Source: Google

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