GDP: the currency used at a record 14.5% of GDP in the midst of a “dash to cash”

The ratio of currency in circulation to GDP hit a new high of 14.5% for fiscal year 2020-21 amid increased demand for liquidity and declining GDP.

However, demonstrating that the digital switch-over and the money-intensity are not mutually exclusive, there is also an increase in all forms of digital payment on the occasion of the fifth anniversary of demonetization, which it is unified payment 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 conditions of extreme uncertainty. This has been experienced by the United States, Spain, Italy, Germany, France, Brazil, Russia and Turkey as well.

Meanwhile, digital payments are almost three times what they were in fiscal 2018. The Reserve Bank of India’s digital payments index, which has 2018 as its base year at 100, increased to 270.

This also takes into account the spread of digital, taking into account the growth of the payment infrastructure.

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

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

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