The ratio of currency in circulation as a proportion of GDP touched a new high of 14.5% for fiscal 2020-21 amid the increased demand for cash and a shrinking GDP.

However, demonstrating that the shift to digital and cash intensity are not mutually exclusive, there is also a surge in every form of digital payment on the fifth anniversary of demonetisation, whether it is Unified Payments Interface (UPI), credit and debit cards or FASTag.

The post-pandemic increase in currency in circulation has been a global phenomenon, described as a ‘dash to cash’ under extreme uncertainty. This has been experienced by the US, Spain, Italy, Germany, France, Brazil, Russia and Turkey too.

Meanwhile, digital payments are nearly three times what they were in FY18. The Reserve Bank of India’s digital payments index, which has 2018 as the base year at 100, has risen to 270.

This also captures the spread of digital, taking into account the growth in the payments infrastructure.

Indicators show that the informal economy has shrunk to 20% of GDP from 40% a few years ago, according to SBI group chief economist Soumya Kanti Ghosh.

This is comparable to Europe and much better than Latin American countries where the size of the informal economy is estimated at 34%.