For many citizens living in rural areas, cash is still the bedrock of daily existence because of a lack of facilities.
Sudhir Shinde, a farmer from Satara district in Maharashtra says he withdraws more money from his bank than required as the money vending machine in his village has not been operational for months.
“If I need money urgently, I must make a 32 kilometre trip to Satara town, which is not always possible,” said the 37-year-old sugarcane farmer Mr Shinde, while buying fertilisers for his winter-sown crops.
“I always keep money in hand assuming family emergencies like hospitalisation or any other such urgent requirements”.
Prime Minister Narendra Modi backed a shock ruling in November 2016 to outlaw 86 per cent of cash in circulation to target undeclared “black money” and fight corruption.
The demonetisation got rid of old 500 and 1,000 rupee banknotes and PM Modi said that would boost the country’s digital economy, unearth unaccounted wealth and reduce the use of cash.
But 99.3 per cent of the junked currency is back in the banking system, suggesting that only a miniscule portion was unaccounted illicit money or fake currency notes, and India’s addiction to cash is now, perhaps stronger than ever.
One of the key objectives of the note ban was to discourage the use of cash, but India continues to see a surge in currency in circulation even as economic growth has slowed to a six-year low.
Central bank data shows that since the controversial demonetisation gambit, currency in circulation has grown, rising 17 per cent to Rs. 21.1 lakh crore ($295.7 billion) as of the end of March 2019.
The ratio of currency in circulation to GDP has risen to 11.23 per cent as of March 2019 up from 8.69 per cent at the end of March 2017.
To be sure, digital transactions have grown, rising 19.5 per cent in value in 2018/19 and 22.2 per cent in 2017/18, the Reserve Bank of India said in a report.
On whether the government’s efforts to move to electronic payments has been slow, the central bank noted what it said in a statement last week.