Summary:

The consistent increase in Currency in Circulation (CIC) at a 15 per cent compounded annual growth rate (CAGR) over the past seven years reflects a robust economic performance and signifies a positive economic cycle, as highlighted in the CMS’ Consumption Report for 2024. This growth in CIC has been attributed to various factors, including the launch of UPI in 2016 to promote digital transactions.

Table of Contents:

Economic Performance and CIC Growth

The report indicates that while UPI was introduced in FY17 to boost digital transactions, the CIC in India surged from Rs 13.35 lakh crore in FY17 to Rs 35 lakh crore in FY24, marking a significant threefold increase over 7 years.

Cash Usage and Economic Correlation

The amount of CIC in circulation is closely linked to cash payments, with a substantial portion of currency being used for transactions. Studies have shown a correlation between CIC growth, economic activity, and consumption patterns, as evidenced by the CMS Cash Index (CCI) and HSBC India Composite Purchasing Managers Index (HSBC ICPMI).

During FY24, ATM withdrawal trends varied across states and union territories, with some regions experiencing growth in annual average withdrawals while others saw a decline. Monthly ATM cash withdrawals also reflected consumption patterns, with certain states recording higher average withdrawals compared to others.

Key Highlights:

  • Monthly average ATM cash withdrawals increased by 5.51% in FY24.
  • Karnataka led in terms of absolute withdrawal per ATM, followed by Delhi and West Bengal.
  • Analyzing ATM withdrawals revealed insights into consumption trends at both grassroots and urban levels.

CMS’ analysis underscores the significance of a robust payments ecosystem that accommodates diverse transaction modes, including cash payments alongside digital channels. The balance between different payment methods is vital for sustaining a consumption-driven economy like India, where spending behaviors impact overall economic health.

High-Growth Retail Sectors

In FY24, key retail sectors exhibiting substantial consumption growth included media & entertainment, FMCG, railways, aviation, and durable goods. Understanding consumption patterns in these sectors provides insights into the vibrancy of the economy and consumer preferences.