India's cash in circulation has hit a record ₹40 trillion in January, paradoxically coexisting with surging UPI transactions. This monetary puzzle reveals complex economic dynamics where digital payments haven't entirely replaced cash. Recent GST notices targeting small traders might be driving some businesses back to cash transactions, creating an unexpected market response. The cash-to-GDP ratio has actually declined to 11.2% in 2025-26, indicating a gradual shift towards digital payments. Monthly ATM withdrawals are trending upward in states like Karnataka, Tamil Nadu, and West Bengal, suggesting persistent cash dependency. Interestingly, UPI transactions now represent 70% of total currency in circulation, highlighting the ongoing digital transformation of India's financial ecosystem.
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