With Prime Minister Narendra Modi's sudden move to cancel the legal character of old Rs 500 and Rs 1,000 currency notes in the fight against black money and corruption, the focus is all the more high on digital payments as the way forward.
However, experts feel that continuing rise in the circulation of currencies in economic activities could well be a key impediment in the transformation to a cashless and digital economy.
Surprisingly, another emerging economy Indonesia has a much lower ratio of around 5 per cent.
In the case of Switzerland, ratio between bank note circulation and GDP has been on the rise since 2007. Besides, out of the total notes in circulation, those with denominations of 1,000 and 500 Swiss Francs make up for more than 62 per cent of the total, as per data available with the Swiss National Bank.
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At the end of 2015, the volume of American dollars in circulation was little over 38.1 billion and the upward trend is being witnessed since 2000, as per data from the US Federal Reserve.
The circulation of euro cash jumped to 1.1 trillion euros at the end of 2016 September quarter, which is three times higher than seen in 2003, Deutsche Bank said in a recent report.
With respect to India, a July report, jointly published by Google and Boston Consulting Group, projected that digital payments market would account for around 15 per cent of the GDP by 2020.
Non-cash contribution in the consumer payments segment would double to 40 per cent, it said.
As part of larger efforts to transform the country into a
cashless economy, the government has also set up a panel to look into digital payments for all government-citizen transactions.
Last year, a World Bank report said that while bank account penetration in India jumped to 53 per cent between 2011 and 2014, the number of dormant accounts were also high.
Translated into absolute numbers, the count stood at 175 million.
According to State Bank of India's Economic Research Department, the present size of digital banking is about Rs 1.2 lakh crore.
The recent Deutsche Bank report said that with growing use of electronic payments, the need for physical cash is no longer self-evident.
"Indeed, cash has come under scrutiny for reasons of monetary policy, law enforcement and efficiency. Although cash-related evidence is scarce, facts rather than emotions should found the debate on the future of physical cash," it noted.
On the flip side, concerns over possible data breach remain, as witnessed in the recent episode where more than 32 lakh debit cards were reported to have been compromised.
Despite turning digital, some developed economies too have been seeing spurt in frauds.
Deutsche Bank report noted that while payments go digital, fraud follows. "An (almost) cashless Sweden sees card fraud rising. However, the general safety of both cash and cashless transactions in Europe is high," it added.
This size has to increase to Rs 3 lakh crore -- which is a conservative estimate of the gap between the actual currency in circulation and required currency in circulation, the report said.
Experts opined that abolishing cash would not completely eradicate crimes that are driven by profit but the costs would be higher in using alternative ways to channelise the proceeds from illicit activities.
The move, according to the government, is an integral part of its strategy to transform India into a cashless economy.