New Delhi: Many questions are being raised about the decision on demonetisation (2016). Those raising questions say that despite demonetization, there has been an increase in the use of cash in the economy. There is no doubt that the use of cash has increased, but there is a break at a fast pace.
Demonetisation was decided in the financial year 2016-17. Currency circulation was 10 lakh crore in 2014-15. It picked up in the next financial year (2015-16), but the demonetisation decision was taken on 8 November 2016. This decision led to a drop in 2016-17. The impact of demonetisation did not show in the next financial year 2017-18 and it gained momentum. After that it increased further in 2018-19 and reached 20 lakh crores. It is to be noted here that the rate of increase in currency circulation was 10.20% between FY 2014-15 to 2018-19. Had the demonetization decision not been taken, the currency circulation would have been 3.5 lakh crore more in 2018-19.
Considering the pattern of cash usage, in 2017, 72 percent of the cash was used in physical transactions. E-money is 7 percent, debit cards 11 percent, credit cards 9 percent and bank transfer 0 percent.
19% cash on delivery is also used on e-commerce platforms. E-money was used 28 percent, debit cards 15 percent, credit cards 16 percent and bank transfer 19 percent.
The use of debit cards has also diversified. Apart from cash withdrawal, its usage has increased in other types of payments. In 2014-15, 83 per cent of debit cards were used only to withdraw cash and 17 per cent were used for other transactions. In 2018-19, 50 percent was used to withdraw cash and 50 percent was used for other types of payments.
The number of credit card users has doubled in the last five years. The total number of credit cards in 2014-15 was 211 lakh which increased to 553 lakh in 2018-19. During this period, the number of debit cards increased from 55.30 crores to 90.60 crores. However, its number declined (80.50 crore) by December 2019 as the old card has been de-activated for safety.
The volume and value of digital transactions has increased significantly since demonetisation. The digital transaction volume in 2016-17 was 978 crores which increased to 2339 crores in 2018-19. It has gained 140%. In terms of value, it has increased from 1122 lakh crore to 1638 lakh crore. It has gained 46% in value.
The use of UPI and e-money has increased significantly since demonetisation. In terms of volume, most digital payments are now made through UPI. After that comes the e-money and debit card number. In terms of value, bank transfer is still the most prevalent.
