After demonetization of existing high value currency notes on November 8th 2016, India is poised to venture towards an era of cashless transactions. However, turning into a cashless economy overnight remains a distant possibility.
India is a huge country having second largest population of the world. When compared with developed nations, it is at a palpable disadvantage when it comes to technological advancement and growth. It is impossible to turn it a hundred percent cashless society. In fact, no country of the world is fully cashless. Even in USA, around 45 percent transactions take place in cash. In Australia, which is a small country population-wise, only 20 percent transactions are done in cash. India adds the population of whole Australia in a single year into its total population; hence a fair comparison between the countries is not feasible. Nonetheless, despite its lower level of development and vast population, the case for going cashless is very strong in India.
India is vulnerable to a very high level of corruption which is not limited to the administrative system, but permeates wherever there is power. Even the implementation of the demonetization scheme saw a setback due to widespread corruption in the Indian banking system. Cashless societies can help clean this culture of corruption by replacing the main mode of illegal transactions ? cash payments. This is why the best way to minimize corruption and black money is to do away with cash and to replace it with easily traceable, cashless means of payment. It is true that there are other channels for payment of corrupt transactions as well, but cash is the prime engine that steers corruption. Switching to a cashless economy thus becomes a viable option.
But, this is easier said than done. One third of Indian population is illiterate. They do not even know to read and write. Even the literate face inconvenience and discomfort while using cashless modes of payments because of non-exposure to modern technology used for cashless transactions. The ordeals of the illiterate remain unimaginable.
Thus, total cashlessness is impossible in India in the near future. Hence the focus should be on devising ways to raise the level of cashlessness up to the maximum, without depriving people of their preferred modes of payment. An effort has been made in this direction by doing away with only high denomination notes. This provides our policy makers an opportunity to push cashlessness in high value transactions, while leaving cash to take care of low value transactions.
After demonetization, the existing Rs 500 and 1000 notes have been done away with; the government has issued new Rs 2000 and Rs 500 notes. If the government wants to move towards cashless society, these two notes would have to be demonetized too. In fact, those who were supporting demonetization of high currency notes, where wondering why the government had introduced a bigger note of Rs 2000. One explanation is that the government wanted speedy remonetization after demonetization of two big notes. In order to achieve that end, it has printed Rs 2000
notes. It is being speculated that government will withdraw this Rs 2000 note, once normalcy is attained and a certain level of cashlessness is achieved.
Not only Rs 2000 currency notes, but also Rs 500 currency notes would have to be phased out, if the government wants to pursue its policy of cashlessness in a vigorous manner. Rs 100 currency notes should be sufficient to take care of the cash transaction portion of the market.
However, critique of electronic transactions does not end at the problems concerning its implementation. Another valid criticism of digital transaction is about the cost of transaction. In cash transactions, there is no cost. For instance, If you are purchasing a service or good of Rs 100, you pay Rs 100. But to go digital you have to purchase another service and that is the service provided by the owner of the concerned digital platform. This is why one has to make a payment of Rs 102 or Rs 103 to purchase a service or good costing Rs 100. Thus there is a need for at least one platform which is free of cost. Fortunately, the Aadhaar Enabled Payment System app, developed by governmental agencies, is free of cost. In the march towards cashless India, this app might become the torch bearer.
Thus, the concerns around demonetization, albeit relevant, are not incurable. Many efforts have already been made to tackle these hindrances. Hopefully, a smooth and enabling cashless economy awaits these efforts.
-Contributed by Kriti
Picture Credits: ibtimes.co.in