As per SBI estimates, people might be retaining about Rs 3.3 lakh crore in cash concerning emergency reasons because of COVID-19 related disruption in their salary expectations. The increase in the cash to GDP ratio could be confusing because of this factor. If one adapts during an emergency, the cash to GDP ratio might be lesser when compared to the pre-demonetisation level.
Consumers are shifting to high-end technology platforms such as Unified Payments Interface (UPI), which does not need a point of sale machine’s intervention and two-factor authentications. UPI transactions have increased by 70 times in the last four years.
Due to the COVID-19 pandemic, people could be holding about Rs 3.3 lakh crore in the form of cash as a precautionary measure beginning FY21. SBI’s research report estimates that without the COVID-19 pandemic GDP downfall, the CIC/GDP ratio would have stood at 12.7% in FY21 versus 12.4% in FY11.
As per the latest reports, currency in circulation stayed consistent over the last year and stood at Rs 1.25 lakh crore even though record transactions were seen during Diwali. According to the latest RBI data, currency in circulation increased to Rs 43,892 crore during the festival weekend, almost the same as last year’s Diwali week when the festive spending was dull. Also, this had occurred for the first time after 2014.
Consumers are now keen on making payments conveniently, i.e., via a click of a button. The significant amount of information generated as a by-product with UPI transactions becomes a substantial resource for evidence and real-time based policy making. The report also suggests banks increase investments related to cloud platforms.
For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in
Bhavana is a Senior Content Writer handling the GST vertical. She is committed, professional, and has a flair for writing. When away from work, she enjoys watching movies and playing with her son. One thing she can’t resist is SHOPPING! Her favourite quote is: “Luck is what happens when preparation meets opportunity”.
