Cashless Economy: A Digital India Mission To Be Achieved

According to the cashless India website of the Government of India, the programme of Digital India of the Government of India is a flagship programme that carries a vision to reorganize the country into a knowledgeable economy and the digitally empowering society. The main roles professed in Digital India program are “Faceless, Paperless and Cashless”. The mission of the government of India is with an objective to take India in a cashless economy and it was started with the announcement of demonetization of currency notes of 500-1000 on November 8, 2016.

A system where the use of physical cash is nil is known to be a cashless system. Payments in this system are made through credit and debit cards, virtual wallets and bank electronic fund transfers.

Benefits that were foreseen:

Cost Reduction: as printing of currency notes incur huge cost to the government and other cost that includes security, storage and transportation of cash. Therefore cashless system will lower the cost associated with the cash.

Risk Reduction: The most crucial risk of keeping money in shape of currency notes and moving it is getting stolen or sometimes lost. But in the case of virtual wallet, cards, etc. if the card is stolen or lost we can easily get it blocked or we can change the password of a mobile wallet remotely. Thus it’s a safer and easier spending method especially while travelling.

Convenient: Going Digital is also a convenient way to pay and spend on things. The easiness of conducting the transactions is one of the biggest reason to get digital. Queue at ATM can be avoided by going digital and you transact 24*7 along with saving time. It will also avowing physical KYC with the service providers as in the usual course of nature.

Tracking spends: sometimes we forget the money spend and unable to track it down, but this is not the case with the digital payments as the spending that were done through mobile applications can easily be tracked by going in orders or transaction history. This also allows the account holders to track their spending and thereby managing its budget effectively.

Increase in tax base: Some group of people like traders, shopkeepers, small businesses and purchases in the regular course use cash so as to avoid paying taxes.  Whereas, in a cashless economy the transactions are done through the organized channel i.e., through banks and other financial institutions, which can easily be monitored and accounted by the government and actions could be initiated against the evaders. Thus the transparency in the system will lead to fall in corruption which will surely make the economy of the country better.

Restriction on parallel economy: if there is a cashless economy the government can easily track the black money and the illicit transactions in which money does not inflow in the banking system unlike cash based economy. In case of the digital transactions it is easy to monitor the suspicious transactions and the records of all the transactions are available with the banks.  

Financial Inclusion of low income households: presently, the low-income households in India gets the credit through some informal systems, like through relatives or private and local lenders at unreasonable rate of Interest. Thus making them shift towards the cashless payment will soon formalizes this method of informality and thereby crediting them through formal ways and including them in formal economy.

Discounts by service providers: Almost every ecommerce websites and platforms offer some discounts and sometimes huge incentives by way of discounts, loyalty points, cash back to lure the customers for making transactions digitally for shopping online.

Now the main point of discussion is that if people of India are ready to accept this digital way to make payments and thereby ignore the carrying of cash so as to take advantage of the abovementioned things, there are various points to show the ratio of acceptance and the people who are ready to do so:  

As per the reports of the Telecom Regulatory Authority of India, that 82 of every 100 people in India owns a mobile as on 30 September 2016. The evolution of the mobile and data ecosystem, with very low in call and data rates, along with the lower rates of smart phones, is inducing people to shift towards a cashless economy.

The government of India is has made a good road map to make India help move towards a cashless economy. As the major initiatives taken by the government such as demonetization, BHIM, Direct Benefit Transfers, etc is helping as an intent to regulate the economy and cut the roots of corruption.

The acceptance of proposal by government that transactions up to ₹2000 would be free of charge through BHIM, debit card and UPI.

Government started a DigiDhan campaign in which there were16 lakh lucky winners (comprising of both users and merchants) who were therefore rewarded by prizes from Rs 1000 to 1 crore.

Also, initiatives such as USSD and the service of dialing *99# have successfully ensured that the non-Smartphone users were also using the cashless drive.

3 times increase in the downloading of the mobile wallet applications within just 2 days of the demonetization announcement.

1 million: the Number of newly subscriptions of credit and debit cards just within two days of announcement of demonetization.

100%: very high growth in enrollment of customer’s with leading mobile wallets applications after demonetization.

Whereas there are various hurdles in implementing the cashless economy and it requires proper planning and regulating the implementation. Such as:

In India 60% of the population just belongs to the rural region. Whereas a quarter of the population that belongs to rural populace don’t carry mobile phones and a large percentage of them comprising of computer illiterate. The rural people are not used to computers or smart phones for the transactions and mainly rely on other people for help. This sometimes it therefore leads to the misuse of their accounts and misplacing of funds, so maximum rural mass goes with cash over the digital modes of payment.

About 90% of the labor market in India is informal. Majority of them are being employed in agriculture as well as the manufacturing sector where they work as a daily wage worker or on contractual basis. Thus informal labor market is mostly cash dependent.

By: Anuja Arora