According to a recent study by a Reserve Bank of India (RBI) economist reported by The Economic Times, cash currently accounts for 60% of consumer expenditure as of March 2024. However, this share is rapidly declining, driven by a significant shift towards digital payments in the post-Covid era. The study highlights that the share of digital payments has surged from 14-19% in March 2021 to an impressive 40-48% by March 2024.

Mr. Pradip Bhuyan from the RBI's Department of Currency Management pointed out that the Cash Usage Indicator (CUI), which tracks both physical cash and digital payment modes, demonstrates a notable decline in cash usage. The CUI has decreased from 81-86% in Q1 2021 to 52-60% by Q1 2024. This quarterly indicator is instrumental in aiding effective currency management across the nation.

The report underscores the impact of the United Payments Interface (UPI), which was launched during the demonetisation period in 2016, specifically targeting high-denomination notes of US$ 5.95 (Rs. 500) and US$ 11.90 (Rs. 1,000). Following the Covid-19 lockdown in 2020, UPI experienced substantial growth in usage. The average transaction size for UPI transactions has significantly dropped from US$ 46.06 (Rs. 3,872) in FY17 to US$ 18.14 (Rs. 1,525) in FY24. This trend reflects the increasing reliance on UPI for small-value purchases, illustrating a shift in consumer preferences.

While cash continues to be the preferred mode of payment for low-value transactions, the currency with the public (CWP) to Gross Domestic Product (GDP) ratio peaked at 13.9% in the aftermath of demonetisation in 2020-21 and has since decreased to 11.5% in FY24. Furthermore, UPI's share in person-to-merchant (P2M) transactions has witnessed a remarkable rise, climbing from 33% in value terms during 2020-21 to 69% in FY24. In terms of transaction volume, UPI's share surged from 51% to an impressive 87%, indicating a significant substitution of cash with UPI, particularly for smaller-value transactions.

This evolving landscape of payment preferences is indicative of a broader economic shift in India, with digital transactions becoming increasingly prevalent. The ongoing transition toward digital payments not only enhances convenience for consumers but also contributes to greater financial transparency and efficiency in the economy.

As the country continues to embrace this digital transformation, the implications for economic growth and consumer behavior will be profound. To stay updated on financial trends and investment opportunities in India, visit the Best IPO to Apply Now - IPO List 2024, Latest IPO, Upcoming IPO, Recent IPO News, Live IPO GMP Today - Finance Saathi and explore Top News Headlines - Share Market News, Latest IPO News, Business News, Economy News - Finance Saathi.

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The notable rise of digital payments and the declining reliance on cash signal a transformative shift in India's economic fabric, paving the way for enhanced financial inclusion and a more efficient monetary system.