“ A cash usage indicator (CUI) taking into account both physical and digital modes of payments indicates that the cash usage remains significant but has been declining during the period under study “ said the author Pradip Bhuyan from the Reserve Bank’s department of currency management in a paper titled ”Cash Usage Indicator for India” which analysed consumer spending data from 2011-12 to 2023-24.
Cash Usage Indicator for India. The views are of the author and not necessarily of the central bank. “ CUI is a quarterly indicator and can facilitate currency management” the author said.
The CUI or the share of cash usage in the private final consumption expenditure, which ranged from 81 to 86 percent in January-March 2021 is down to 52 to 60 percent by January-March 2024.
Significantly digital payments platforms particularly the United Payments Interface or UPI was launched commercially during demonetisation of Rs 500 and Rs 1000 notes in 2016 . But the usage attained scale and got a big boost only after the COVID-19 induced nation-wide lockdown in 2020.
The The study analysed various relevant data for consumer spending through cash and digital modes and noted that average ticket size of UPI transaction from Rs 3872 in 2016-17 when UPI was launched to Rs 1525 in Rs 2023-24. At the same time, cash is used for low-value purchases.The currency with the public (CWP) to GDP ratio which had peaked to 13.9 percent of GDP in 2020-21 , post demonetisaton of Rs 500 and Rs 1000 notes in 2016 is down at 11.5 percent of GDP in 2023-24. The share of UPI in person to merchant (P2M) transactions increased from 33 percent in 2020-21 to 69 percent in 2023-24 in value terms and from 51 percent to 87 percent in volume terms.Hence the author concludes that the decline in the average size of UPI transactions, the increase in the share of P2M in UPI (in volume and value) and the moderation in the ratio of CWP to GDP in 2023-24 from its pre-pandemic level suggest substitution of cash with UPI for small value transactions.