The Sociological Significance of Physical Currency in Informal Economies

While orthodox economic narratives position physical currency as an inefficient tool that promotes tax evasion, economic sociology reveals that cash functions as vital social infrastructure within informal economies. Drawing upon Viviana Zelizer’s framework of "special monies" and "differentiated circuits”, this paper explores the unique sociological work physical currency performs that digital payment networks cannot easily replicate. Globally, the informal sector encompasses approximately 2 billion workers—representing 60% of the workforce—for whom cash is the primary transaction medium and a crucial anchor for survival, autonomy and trust. Through an examination of street vending, gendered cash management and ritual exchanges, this paper demonstrates how physical money actively builds social capital and preserves personal dignity among unbanked and vulnerable populations. Furthermore, analysing the Indian context highlights a striking paradox: despite the monumental expansion of digital systems like the Unified Payments Interface (UPI), currency in circulation continues to rise, giving birth to a sophisticated, dual-track monetary system. Finally, this paper outlines critical policy implications for Central Bank Digital Currency (CBDC) design and proposes a four-pillar framework to address informality through gradual transition, education and social protection rather than abrupt financial formalization.