Currency Surge: Nine Years Post-Demonetisation
Nine years after the demonetisation announcement in India, the currency in circulation has witnessed a remarkable increase. The total currency with the public has doubled from Rs 17.97 lakh crore in November 2016 to Rs 37.29 lakh crore by October 2025. This surge follows the government’s decision to demonetise Rs 500 and Rs 1,000 notes, which was aimed at curbing black money and promoting digital payments.
The demonetisation move created significant disruptions. Initially, the economy faced challenges with a decline in demand, as businesses struggled and GDP growth fell by nearly 1.5 percent. Many small businesses shut down due to liquidity shortages, leading to long queues at banks and ATMs. This shock forced individuals and businesses to rethink their cash management strategies.
Interestingly, the Covid-19 pandemic further impacted cash dynamics. In 2021, there was a notable increase in cash holdings as people rushed to stockpile cash for essential needs during lockdowns. Grocery stores and medical expenses became significant cash-driven transactions, highlighting a cultural preference for cash in everyday life.
The Reserve Bank of India (RBI) defines currency with the public as total currency in circulation minus the cash held by banks. Despite an increase in the absolute amount of currency, the currency-to-GDP ratio has fluctuated. After reaching a high of 14.5 percent in 2020-21, the ratio has decreased to 11.11 percent in 2025, indicating a gradual shift toward digital payments.
When compared to other major economies, India's currency-to-GDP ratio remains high. For instance, Japan's ratio stands between 9-11 percent, while the Eurozone is at 8-10 percent. This high ratio in India reflects its substantial cash-dependent informal economy, coupled with limited card usage and a slower adoption of digital payment systems.
Despite government efforts to encourage a less cash-dependent society, cash transactions continue to dominate. The Unified Payment Interface (UPI) has revolutionized digital transactions in India, showcasing rapid growth. With billions of transactions occurring annually, UPI is expected to further entrench itself in the Indian payment landscape, emphasizing the coexistence of cash and digital methods in the economy.
