Despite the rapid growth of digital payments in India, cash continues to maintain a strong demand, especially during key events such as elections and festivals. Reserve Bank of India (RBI) data on currency circulation reveals that cash demand fluctuates significantly, reflecting the influence of various socio-political events.
Cash in circulation in India has experienced dramatic swings in recent years, influenced largely by events like elections and festivals. In 2019, for instance, cash demand surged by Rs 87,000 crore during the Lok Sabha elections and then dropped sharply, only to rise again by Rs 85,000 crore around major festivals such as Navratri and Diwali, and during state elections.
This trend of fluctuating cash demand has continued, with notable increases during key periods and corresponding declines afterward.
Cash Demand During Elections and Festivals
An analysis by Economic Times shows that cash demand saw a significant spike of Rs 87,000 crore between mid-March, when the Lok Sabha elections were announced, and early June, when the elections concluded. Following this, cash circulation decreased by Rs 84,000 crore by the end of September.
Once again, during the festival period of Navratri and Diwali, and leading up to the state assembly elections in Maharashtra and Jharkhand, cash demand surged by Rs 85,000 crore. However, this spike was short-lived, and by late November, cash in circulation contracted by Rs 20,000 crore, with Rs 10,000 crore disappearing in just one week following the assembly elections.
The RBI often attributes the fluctuations in cash demand to factors like elections, festivals, and strong agricultural performance. These events lead to higher spending, prompting a temporary spike in the need for physical currency.
Despite the increasing popularity of digital payment methods, cash remains an essential part of India’s economy, especially in rural areas and among certain demographics that prefer physical money for day-to-day transactions. While digital payments continue to grow, cash still plays a crucial role during festive seasons, election periods, and times of economic uncertainty.
