In the first half of April, India's currency in circulation surged by over ₹61,000 crore (around $6.40 billion), pushing the total to a record ₹42.3 trillion. This represents an 11.8% year-on-year increase, the highest since the early months following the November 2016 demonetisation. Economists attribute this spike to a combination of strong rural demand, which has been bolstered by a cut in the goods and services tax on essential items, and lower interest rates that encourage spending. The rise in cash demand has been consistent over the past six months, following a period of subdued currency demand relative to GDP growth. However, this increase in currency could pose challenges for liquidity in the banking system, which the Reserve Bank of India (RBI) has been managing to support economic activity. Analysts from HDFC Bank predict that liquidity surplus will average around 1% of deposits in the first half of the current financial year but may drop to 0.5% in the latter half if cash demand remains high due to inflation and rural spending. Maintaining liquidity within a range of 0.6% to 1.1% is crucial for keeping the spread between the weighted average call rate and the policy rate narrow.