India’s wealthy elite love their cash – not just for convenience, but for what it hides. Despite a surge in digital payments, stacks of unaccounted currency still fuel real estate deals and many economic activities in the informal part of the economy, leading to tax dodging and funding of election campaigns. The data is clear: the rich aren’t just richer – they’re also sneakier.
The Reserve Bank of India (RBI) recently released its annual report for 2024-25, where it shared the data on the currency in circulation to the gross domestic product ratio (GDP) ratio for the year.
Currency in circulation (CIC) is the cash in our wallets, purses, suitcases, bags or cash that’s tucked away in almirahs and stashed under mattresses – and yes, even hidden under false ceilings in some cases. It also includes the cash held by banks. It’s money we can touch and then spend, with touch being the important word here. It’s money which is not spent through a smartphone. GDP is the measure of the size of an economy during a particular year.
Here’s what the CIC-to-GDP ratio shows.
What does the chart tell us?
1) The CIC to GDP ratio or to put it simply the cash in the economy stood at 11.2 percent of the GDP as of the end of 2024-25 or March 2025. This is lower than 11.7 percent as of March 2024.
2) The cash in the economy stood at 14.4 percent of the GDP as of March 2021. This was primarily because people preferred holding a higher amount of cash during the pandemic in order to be able to finance a medical or a financial emergency. Clearly, people are now comfortable with the idea of holding more money in the bank than in the form of cash.
3) How do things look in comparison to the pre-demonetisation years? The demonetisation happened in November 2016. As of March 2016, the cash in the system had stood at 12.1 percent of the GDP. As of March 2014 and March 2015 it had stood at 11.6 percent. So, the cash in the system as of March 2025 is slightly lesser than it was pre-demonetisation.
4) The big difference in the world as it is now and as it existed pre-demonetisation and pre-pandemic is that digital payments – particularly payments made through the united payments interface (UPI) mechanism – have taken off big time.
Indeed, as the RBI annual report points out: “The success of Unified Payments Interface placed India in a leadership position with a share of 48.5 per cent in global real-time payments by volume.”
Take a look at the following chart. It plots annual UPI transactions (in billions) over the years.
In 2019-20, the year before the pandemic broke out majorly, the total number of UPI transactions had stood at 12.5 billion. By 2024-25, they had jumped to 185.9 billion.
Even the total value of UPI transactions has gone up big time from Rs 21.3 lakh crore in 2019-20 to Rs 260.6 lakh crore in 2024-25.
In fact, UPI is not the only form of digital payment. There are other ways as well. As the RBI annual report points out: “During 2024-25, total digital payments recorded growth of 34.8 per cent and 17.9 per cent in volume and value terms, respectively.”
5) Now, more digital payments happening should automatically imply people using lesser cash as a result and hence, lead to lesser cash in the system. There is no denying that that has happened, but only to some extent.
As mentioned earlier, the value of UPI transactions in 2019-20 stood at Rs 21.3 lakh crore. In 2024-25, it was 12 times that at Rs 260.6 lakh crore. In comparison the cash in the system has fallen from 12.1 percent of the GDP to 11.2 percent.
So, what explains this? One explanation for this lies in the fact that a bulk of digital payments are basically of small value. As National Payments Corporation of India had pointed out in a letter to member banks in March 2022: “Various studies on payment systems have observed that about 75 percent of the total volume of retail transactions (including cash) in India are below Rs 100 transaction value. Further, 50 percent of the total UPI transactions are having a transaction value of up to Rs 200.”
With inflation these values of digital payments might have gone up a little, but many medium to large transactions are still happening in cash.
Cash still rules in many corners of the economy. Plenty of doctors prefer it. So do small hospitals and mom-and-pop stores — especially when the bill isn’t pocket change. That cash often flows up the chain to distributors and wholesalers. The same is true about many lawyers and chartered accountants.
Real estate remains a major cash magnet, particularly when market prices outpace official circle rates. And let’s not kid ourselves – a chunk of that cash finds its way to builders, and from there into the hands of politicians, bankrolling their election campaigns.
But there’s more to this. Cash is the lifeblood of a vast underground economy – from tuition classes and private tutors to wedding planners, home renovation crews, interior decorators, and building contractors. Need your kitchen redone or your child married? Don’t be surprised if you are asked for cash – tucked inside envelopes, not logged in apps.
Entire ecosystems run on cash to dodge taxes, skip paperwork, or simply because that’s how it’s always been done. It’s not just evasion – it’s an operating model. Indeed, cash isn’t a fallback; it’s the default. Which means many dodge paying income tax on money they should be declaring to the tax authorities.
6) The fact that many Indians – especially the richer ones – don’t pay their fair share of income tax, is reflected in income tax data as well. Take a look at the following chart, which plots the number of individuals earning an income of greater than Rs 1 crore and filing income tax returns.
In 2011-12, the number of these individuals stood at 36,690. By 2022-23, this had touched 2.27 lakh, an increase of around 18 percent per year on average in the 11-year period. I used this 18 percent annual increase to project the number of such individuals for 2023-24 and 2024-25. For 2024-25, the figure comes at 3.17 lakh.
Basically, in all of India, as per a projection based on income tax data, there are just 3.17 lakh individuals who have an income of higher than Rs 1 crore. That’s astonishing, especially considering the explosion in high-value economic activity. Clearly, many rich Indians are not paying their fair share of taxes.
This reminds me of something that I recently read in Andrew O’Hagan’s brilliant state of the nation novel Caledonian Road: “One of the few things I’ve learned… is that the delinquency caused by affluence is by far the worst sort. At school, we were taught that poverty caused delinquency, but in fact it isn’t the person who steals a half bottle of vodka from Tesco who destroys society, it’s all those rich people who dedicate their lives to tax avoidance.”
Indeed, whether we like it or not, that’s the long and the short of it. Digital payments may be booming, but cash still greases the wheels of significant parts of India’s economy – and many rich individuals are riding it tax-free. Until high earners are forced to declare what they actually make, the burden will keep falling on a few, meaning that the salaried suckers will keep footing the bill.
And that’s not just unfair – it’s unsustainable as well.
Vivek Kaul is an economic commentator and a writer.
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