7 years of demonetisation: Cash transactions have risen, UPI an important part in daily life, shows survey

Majority of the people still continue to use cash for services like haircut, paying salary to household help, getting an AC repaired, etc, the survey showed.

On November 7 2016, the Government of India announced demonetisation of Rs 500 and Rs 1000 notes as a step to curb black money in the economy.  This was then followed by the introduction of the Unified Payments Interface (UPI) which has transformed payment of products and services in India.

UPI has become ingrained in urban daily life, representing more than 78 percent of total retail digital payments in India as of May 2023. Last month, UPI crossed a whopping 11.4 billion (1,140 crore) transactions,  setting a new record with transaction value surpassing Rs 17.6 lakh crore.

Similarly, the recently launched Central Bank Digital Currency (CBDC) also has the potential to transform digital transactions.

Although, UPI and other digital payment mechanisms have reduced the number of cash transactions in daily life, cash in circulation in the economy has only increased from 17 lakh crores in November 2016 to 33 lakh crores in October 2023.

Also Read | UPI aims for 2 billion transactions a day by 2030, credit to spur next growth wave: NPCI CEO Dilip Asbe

Property transactions

According to a survey conducted by LocalCircles, 76 percent of those who bought a property in the last 7 years had to pay a component of the price in cash.

The survey had 44,000 responses from citizens in 363 districts of India.

Out of 10,861 people, 15 percent indicated over 50% of the transaction had to be paid in cash; 18 percent indicated that the cash component was 30-50 percent and 15 percent said it was 0-10% percent. It was also noted that 24 percent of the respondents were able to complete the transaction without paying any part in cash.

Also Read | Indian banks offer incentives to lift digital currency transactions

A comparison with the survey done in 2021 shows that the cash component in property transactions is rising as this year only 24 percent indicated that they did not have to pay cash as against 30 percent two years back.

Household purchases without a receipt

26 percent of Indians surveyed still use cash for most of their household purchases and without a receipt. Out of 11,189 citizens, only 15% indicated that they don’t do cash transactions and 3 percent opted for “can’t say”.

As compared to the survey done in 2021, there is a marginal improvement from 11 percent of consumers indicating that their household makes no cash purchase on average to 15 percent saying they completely switched to digital transactions.

Cash is mainly used for grocery purchases, eating out, and food delivery services

82 percent of people, who have used cash for purchases in the last 12 months, say they have used it to pay for groceries, eating out, and food delivery services.

Seven percent of the respondents said they bought long
term assets or valuable items like property, jewelry, used vehicles, etc with cash in the last 12 months, while 4 percent of the respondents have used cash in the last 12 months to buy gadgets like smartphones, laptops, etc.

In services, the majority of respondents have used cash to pay for domestic help, personal services, home repairs, etc., in the last 12 months

The majority of the people still continue to use cash for services like haircut, paying salary to household help,  getting an AC repaired, etc, the survey showed.

Also Read | Will consumers ditch cash and UPI to embrace e-rupee?