Growth of Payment Infrastructure in India (Image Source: Vapulus)
The ratio of currency circulation with its proportion to GDP has shot up to 14.5, in budgetary 2020-21.
Post pandemic has recurred a growing demand of cash flow, rendering a lowered GDP. Simultaneously, five years to demonetisation, has also seen an upsurge in digital payments in the form of UPI, credit, debit cards and FASTags. The shift to digital mode, and intensity of cash flow is seen to be not mutually exclusive. The entire globe has experienced this sharp experience of cash circulation, attributing situations of extreme uncertainty for it. This phenomenon, 'Dash to Cash' is now operating in the US, Spain, Russia, Italy, Germany, France and other first world countries as well.
The spread of digital payment has grown the payment infrastructure in our country. Reserve Bank of India reports virtual transactions to have shot up by 3 times than FY18. The base year of 2018, saw 100 as the digital payment base, which has increased to 270 in FY21, attributing lockdown conditions and health concerns for such immense extensions.
Reviewing the four objectives of Demonetisation, India has seen a rise in digital payments, thereby imposing limitations upon the lower economic background folks who do not have such benefits in hand. There has been a significant drop noticed in fake currencies. Counterfeit notes reported, were at 310,000 at FY19, changed to 290,000 at FY20, and is now at 200,000 (FY21). It has also formalised our economy to a great extent.
SBI Chief economist, Soumya Katie Ghosh, stated a shrinkage of the informal economy to 20% from 40% of GDP a few years ago. This is commendable as the growth now is at the same stake as Europe, and is at a much better output level, compared to Latin American countries (rendering 34% of GDP).
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