India's Cash Dominance Challenged as UPI Transactions Skyrocket

Despite the growth of digital payments in India, cash continues to hold ground as a valuable financial saving and store of value for most Indians. The currency in circulation grew by over 16.6% in 2020-21, while digital transactions soared, with UPI transactions surpassing a trillion dollars. This simultaneous growth of cash and digital payments is referred to as a "currency demand" paradox. Cash is preferred for minor purchases, and falling interest rates, a large informal economy, and expanded direct benefit cash transfers during the pandemic have contributed to the increased preference for cash. Unaccounted-for cash still flows into political campaign coffers and real estate transactions, highlighting the continued significance of cash in these sectors.