Three charts that show why demonetisation is painful

The importance of cash in India can be seen from the fact that the country has a much higher cash-to-gross domestic product (GDP) ratio than most major economies

The Indian economy’s heavy dependence on cash is likely to worsen its pain following the government’s decision to scrap Rs500 and Rs1,000 notes.

A man sits with Rs 500 notes withdrawn from an ATM after PM Narendra Modi announced to cease Rupees 500 and 1000 currency notes in Bhopal on November 8. (PTI)

The importance of cash in India can be seen from the fact that the country has a much higher cash-to-gross domestic product (GDP) ratio than most major economies. Even in terms of cash-deposit ratio, India is much ahead of the US and euro zone. While some of this could be due to hoarding of undisclosed income, India’s huge informal economy is also a major factor in the dominance of cash in day-to-day transactions.

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