Robust Economic Growth Evidenced by India's Currency Circulation

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Disclaimer: The following information is for educational and informational purposes only. It does not constitute financial or investment advice. Readers should conduct their own research or consult with a qualified professional before making any financial decisions.

The consistent increase in Currency in Circulation (CIC) at a compounded annual growth rate (CAGR) of 15% over seven years (FY17-FY24) is indicative of India's robust economic performance, as per CMS' Consumption Report for 2024. Despite the launch of UPI in FY17 to promote digital transactions, CIC surged from Rs 13.35 lakh crore in FY17 to Rs 35 lakh crore in FY24, nearly tripling in seven years, the report highlights.




A February 2020 RBI study suggests that the amount of CIC reflects the use of cash as a payment instrument, given its significant role in payment transactions. The CMS Cash Index (CCI) and the HSBC India Composite Purchasing Managers Index (HSBC ICPMI) have shown a strong correlation since April 2016, underscoring the close connection between cash usage, economic growth, and consumption, as per the report.

Comparatively, smaller economies like Brazil, South Africa, Russia, and the UK exhibit lower volumes of CIC (as a percentage of GDP) than larger economies such as the US, China, Japan, and India, implying a direct correlation between CIC and economic size, CMS notes.

ATM withdrawal trends in FY24 reveal that fourteen out of 23 states and union territories (UTs) experienced a 6.45% year-on-year growth in the annual average ATM withdrawal, while nine states and UTs saw an average decline of 4.14%, according to the report.

Monthly average ATM cash withdrawals, serving as a proxy for consumption spending, grew by 5.51% to Rs 1.43 crore in FY24 compared to Rs 1.35 crore in FY23. Karnataka recorded the highest annual average withdrawal of Rs 1.83 crore per ATM during FY24, followed by Delhi (Rs 1.82 crore) and West Bengal (Rs 1.62 crore).

The report emphasizes the importance of maintaining a balanced payments ecosystem that accommodates all transaction modes, including cash payments, alongside digital alternatives. This balance is crucial for a consumption-driven economy like India, where spending capacity influences overall economic health.

The top five retail sectors with high consumption growth in FY24, according to the report, were media & entertainment (M&E), FMCG, railway, aviation, and durables. In FY23, the top sectors were petroleum, media and entertainment, railway, aviation, and footwear, indicating shifts in consumption patterns over time.






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