A Cashless Economy
One of the flagship goals established by the Modi government has been to transform India into a revolutionised, digital economy. Modi hopes to curb the dependency of cash in the Indian economy and increase usage of net-banking, UPI’s, aadhar card money transfers etc. Moves like demonetizations and aadhar card link up have all hoped to accomplish this goal. Demonetization caused a temporary spike in the number of bank transactions but failed to have a permanent affect. The aadhar card covers more than one billion Indians. This platform allows one billion people to use digital payment systems, yet only 3.73 core worth transaction happened in December, 2017. The Modi government has also imposed laws on making cash transaction above two lakhs on a single day. Despite these changes the government still has a lot of work left. I believe that a cashless economy is the future and needs to be adopted.
A cashless economy is an economy which has low dependency on cash and all money transactions are done through transfer of digital information. A cashless economy has its pros and cons. it provides convenience and can have major benefits to the Indian economy. One advantage is the removal of a black market in the Indian economy. Currently most of India’s economy takes place in the informal sector, through cash. Tracking cash transactions is nearly impossible, making it very easy to evade taxes. Since all transactions in a cashless economy are done through banks. It is very easy for the government to keep track of your money, reducing the chances of tax evasion. In my opinion the removal of black money is vital for India’s growth as a nation.
A cashless economy also removes counterfeit money from circulation.Counterfeit money has been a major concern for the development of the Indian economy and has caused inflation, decrease in the Indian rupee, loss of jobs etc. RBI estimates of last year (2016-2017) put number of fake note in circulation at762,027. This an eminent problem. Many believe that Pakistan is responsible and is constantly pumping fake currency into the Indian economy. A digital economy rids India of this problems.
A very important development is the increase of money stored in banks. In a cashless economy, money transactions require bank accounts. This solves a very vital problem of the Indian economy; the number of loans which are given annually. Since there are more bank accounts, there is more money in the banks. Giving loans is vital for the growth of entrepreneurs and start-up companies.
Transforming India’s 98% of payments from cash to digital is tedious and requires a lot more work. Multiple problems are still to be addressed to ensure the future of a cashless economy. A wide concern is the safety of cashless payment. People still believe that cashless payments are hack able and unreliable. The security of cashless payments is constantly being addressed. The biometric system of the aadhar card has high security systems but is very expensive for the merchant. For the aadhar card payment system the merchant requires a smartphone, a fingerprint scanner and internet connection. This is expensive and cannot be afforded by small retailers. A fingerprint scanner costs about 2,000 rupees. The government must lower the requirements for merchants or this system will be redundant or it will be useless.
A prevalent infrastructure problem is network coverage. Almost two thirds of India live in rural areas and does not receive network. Without an increase in network coverage India’s dream of a cashless economy will never materialize. Another large problem is the no. Of smart phones, a large population of India posses’ phones but few have smart phones which are connected to the internet. This problem needs to addressed. Without smart phones or network it is impossible for a cashless economy to function. This change requires more time and work than the government is giving right now.
An obstacle which India needs to tackle is the dormancy of bank accounts. BJP claims that 99% of India households have a bank account. The problem lies that a lot of these bank accounts are not used and do not store money. The other problem is that though every household has a bank account it does not mean every person has a bank account and without bank accounts the existence of a cashless economy will be impossible.
In my opinion a cashless economy is beneficial and is a much needed change in the Indian economy. It solves vital problems of the Indian economy and has the potential to transform India in all sectors. It is essential for the development of India. A cashless India is still very far but its foundations have been laid.