India's Cash Surge: Demonetization Aftermath Shows Money With Public DOUBLED, But Is Economy Really More Digital?

India's currency in public hands has seen a dramatic increase, more than doubling from ₹17.97 lakh crore in November 2016 to ₹37.29 lakh crore as of October 2025. This surge occurred despite the government's 2016 demonetization move, which aimed to curb black money and promote digital payments by invalidating ₹500 and ₹1000 notes.

The immediate aftermath of demonetization saw economic disruptions, including falling demand and a GDP growth decline of nearly 1.5%. However, in the years that followed, factors like renewed note printing, hoarding, a persistent preference for cash, and the COVID-19 pandemic's impact (leading to a rush for cash for essential needs) contributed to the rise in currency circulation.

While the absolute amount of cash has grown, the currency-to-GDP ratio has decreased from 12.1% in 2016-17 to 11.11% in 2025. This indicates that despite the absolute increase in currency, the economy's growth and rapid adoption of digital payment systems like UPI (with billions of transactions annually) mean cash forms a smaller proportion of the overall economy compared to pre-demonetization. India's currency-to-GDP ratio, though improved, remains higher than other major economies like Japan, Eurozone, and China, reflecting a continued, albeit shifting, reliance on cash.

Impact: This news highlights ongoing structural changes in the Indian economy. The persistent preference for cash, alongside rapid digitization, influences consumer behavior, business operations, and the effectiveness of monetary policy. It is relevant for sectors like banking, retail, consumer goods, and financial technology.

Impact Rating: 7/10

Terms Explained:

Demonetisation: The act of stripping a currency unit of its status as legal tender. In India, this meant old Rs 500 and Rs 1000 notes were no longer valid for transactions.

Currency in Circulation (CIC): All currency notes and coins issued by the central bank that are physically in use by the public for transactions.

Currency with the Public: Calculated by deducting the cash held by banks from the total currency in circulation.

Gross Domestic Product (GDP): The total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. It's a measure of economic size.

Currency-to-GDP Ratio: A metric indicating the proportion of a country's economic output held as physical currency. A lower ratio generally suggests greater use of digital payments and formal banking channels.

Inflation: A sustained increase in the general price level of goods and services in an economy over a period of time, leading to a fall in the purchasing value of money.

Unified Payment Interface (UPI): An instant real-time payment system developed by the National Payments Corporation of India (NPCI) that allows users to transfer money between bank accounts instantly.