Demonetisation After Nine Years: Cash and GDP Ratio
Why in the news
Nine years after the 2016 note ban, cash with the public has risen strongly, showing continued heavy currency use.
Key facts
- Aims: curb black money and fake notes, promote digital payments, formalise the economy.
- Short-term hit: GDP growth dipped about 1.5%; small businesses faced liquidity stress.
- CWP = currency in circulation minus bank cash; CIC = notes and coins issued by RBI.
| Currency-to-GDP | Value |
|---|---|
| 2016-17 | 8.7% |
| 2020-21 (COVID peak) | 14.5% |
| October 2025 | 11.11% |
| Japan | 9-11% |
| China | 9.5% |
| Eurozone | 8-10% |
| Russia | 8.3% |
| USA | 7.96% |
A lower ratio signals more digital payments, aiding monetary policy transmission. India’s ratio stays high because of its informal economy, cash habits and gradual digital uptake.
Exam angle
- CWP versus CIC definitions.