The Turning Point
Before the demonized memories of people standing in long queues outside ATMs and the awe and confusion of the banking activities fades off, let’s recall the Modi’s revolutionary verdict.
On November 8, 2016, the government of India implemented demonetization by recalling Rs. 500 and Rs. 1000 notes which were in circulation. Deadlines were given to exchange the old notes with the new one. Simultaneously, the idea of going cashless is put forward aiming at digitizing the Indian Economy.
The Government in its union budget for 2017-18, has outlined various recommendations for promoting cashless transactions, to ease out the mass anguish.
Moreover, various discounts and freebies were discussed and implemented for digital transactions. The emphasis on a cashless economy is outraged to the majority of Indian people who are still outside the banking sector.
However, the government under Modi-ship had taken a series of pre- planned steps. They implemented “bank account for all” mission, yet a majority has not enrolled in the scheme.
Only a few are aware of the ‘going cashless’ methods, literacy in digitization is yet to be earned for a majority. The relevance of the topic stands between such illiterate majority and the benefits for the nation in a cashless economy.
Economy: Going Cashless
India is on its way of becoming a Cashless economy. It will have an economic system where the transaction of money is in digital form other than transacting them in cash.
For example, purchasing a mobile phone using debit or credit card or even through a net/mobile banking transaction comes under the former category and buying it with cash is the latter.
In short, cashless transaction means money is being credited to the account of the seller by debiting the account of the buyer. Only numbers are getting transacted with the approval and one number is being transacted from one account to another. Here, the mobilization of liquid cash is nil.
“Demonetization”: A Boom
Let us navigate through the effects of India going cashless since last six months,
Each and every transaction is being accounted. It not only enhances the transparency of transactions, rather curbs corruption and criminal activities which is rampant in the country.
- Black Money
The scope for money laundering is limited. Moreover fake currency which accounted to a 1/7th of the total currency was swept off from the system.
- Better deployment of Government Funds
The government can channelize its resources. In 2015, Rs. 25 billion were spent on printing currency notes
- Tax Transparency
Collection of Tax has improved. Majority of the transactions are being made through banks, the government agencies scrutinizes each transaction and verify if the appropriate tax proceeds are received.
- Handling Cost Minimized
The risk and cost of handling currency is minimized. Rather focus on automated banking services has increased manifolds.
- Regularization of Government policies
The scope for parallel financing is curbed. The government is now investing in welfare schemes, subsidies, providing aids and grants without any misappropriations.
Transparency International, a global consortium reported that owing to cashless economy drive the crime rate dipped in Sweden, in 2011.
The Real Challenge
With a sudden outbreak of the verdict for a radical change in the transaction mode caused a mass unrest. But the brighter side to it was that the nation had taken a leap towards a cashless economy.
The usage of debit/credit cards in December 2016 almost doubled compared to the previous months and is progressing. However, the allegations are still alive that the Government has not envisaged the limitations in India for practising cashless transactions to a core level.
Some challenges are,
- Digital divide
Only 35% are using internet in India. There is lack of uniform access of internet facility across the length and breadth of the nation.
According to Price Water Hoopers, more than 200 million people are still outside the purview of the banking sector. Neither have they opened accounts nor are using it regularly. Moreover, people are unaware about the usage of debit and credit cards.
- Resistance to change
Due to lack of knowledge and access majority of the people are not comfortable in using digital transactions. Moreover, added charges on banking transactions, fuel surcharge etc. demotivate people from going cashless.
The government have to adopt more stringent policies or laws to govern digital transactions. It is alleged that the prevailing laws and regimes are not appropriate in handling cyber crimes.
Though the freebies and discounts available for promoting digital economy are available, the approach of the public for going cashless values more in this context. If the practice of usage of plastic cards or online transactions cannot be visualized in reality, spending nature of individuals may adversely affect particularly for spendthrifts; and they may pull back from such transactions eventually.
The implementation of more POS machines, campaigns on digital transactions and rework on the fundamentals may ease the transactions, the improve its usage and paves the way to the economic stability of the nation.
The author is affiliated with QuickCompany which deals in Company Registration, Trademark registration and Other Legal Activities.