Cash circulation in India increased 22 per cent last year despite the pandemic, with rural areas seeing a resurgence.
According the CMS Cash index, currency worth Rs 27.78 lakh crore was in circulation as of December 2020, up from Rs 22.70 lakh crore reported a year ago.
It attributed the rise in cash circulation, to the printing of fresh currency by the Reserve Bank of India (RBI), monetary easing along with government's subsidy distribution plans and spike in demand early pandemic for more cash in the economy to manage demand-supply.
As India moves fast towards a digital economy, cash remains essential in most parts of India and is an integral part of financial inclusion. Rural India is ahead of the curve and is expected to be better in Q4 FY21, CMS said.
The consumption in rural and semi-urban India is finding a way to support the overall economy of the nation. The government's subsidy, disbursal and other benefit programmes have been running seamlessly and cash is getting into the hands of the majority of Indian population without lag, it added.
Rural and semi-metro areas are leading the resurgence of the cash circulation in the economy. They are more than what the year 2020 started with and are near 106 per cent while cash consumption is down to 76 per cent across major metros.
Cash was higher than pre-Covid levels throughout October, November and December 2020. The CMS data also showed that financial literacy and digital payments are yet to penetrate deeper outside metros.
CMS said that it expects that by end of March 2021, the overall Indian economy will be back to 80-85 per cent pre-Covid levels.
States with lower impact of pandemic like Rajasthan, and Bihar performed in terms of cash circulation and states with higher impact of pandemic including Maharashtra, Delhi, West Bengal, Andhra Pradesh and Tamil Nadu continue to lag. Bihar, Rajasthan, Uttar Pradesh, Jharkhand, Chhattisgarh, Karnataka and Gujarat have witnessed high level of resurgence because of reverse migration, which has led to the consumption economy in these regions performing better than pre-Covid times.
CMS Info Systems (CMS) is cash management services company, with a network spanning over 1.15 lakh ATMs and retail outlets that spread across 98.3 per cent of districts in India