Article on cashless india
Answers
What is a cashless economy and where does India stand?
A cashless economy is one in which all the transactions are done using cards or digital means. The circulation of physical currency is minimal.India uses too much cash for transactions. The ratio of cash to gross domestic product is one of the highest in the world—12.42% in 2014, compared with 9.47% in China or 4% in Brazil.Less than 5% of all payments happen electronicallyThe number of currency notes in circulation is also far higher than in other large economies. India had 76.47 billion currency notes in circulation in 2012-13 compared with 34.5 billion in the US.Some studies show that cash dominates even in malls, which are visited by people who are likely to have credit cards, so it is no surprise that cash dominates in other markets as well.
Benefits of Cashless economy
Reduced instances of tax avoidance because it is financial institutions based economy where transaction trails are left.It will curb generation of black moneyWill reduce real estate prices because of curbs on black money as most of black money is invested in Real estate prices which inflates the prices of Real estate marketsIn Financial year 2015, RBI spent Rs 27 billion on just the activity of currency issuance and management. This could be avoided if we become cashless society.It will pave way for universal availability of banking services to all as no physical infrastructure is needed other than digital.There will be greater efficiency in welfare programmes as money is wired directly into the accounts of recipients. Thus once money is transferred directly into a beneficiary’s bank account, the entire process becomes transparent. Payments can be easily traced and collected, and corruption will automatically drop, so people will no longer have to pay to collect what is rightfully theirs.There will be efficiency gains as transaction costs across the economy should also come down.1 in 7 notes is supposed to be fake, which has a huge negative impact on economy, by going cashless, that can be avoided.Hygiene – Soiled, tobacco stained notes full of germs are a norm in India. There are many such incidents in our life where we knowingly or unknowingly give and take germs in the form of rupee notes. This could be avoided if we move towards Cashless economy.In a cashless economy there will be no problem of soiled notes or counterfeit currencyReduced costs of operating ATMs.Speed and satisfaction of operations for customers, no delays and queues, no interactions with bank staff required.A Moody’s report pegged the impact of electronic transactions to 0.8% increase in GDP for emerging markets and 0.3% increase for developed markets because of increased velocity of money
An increased use of credit cards instead of cash would primarily enable a more detailed record of all the transactions which take place in the society, allowing more transparency in business operations and money transfers.
This will eventually have the following chain effect:
Improvement in credit access and financial inclusion, which will benefit the growth of SMEs in the medium/long run.Reduce tax avoidance and money laundering thanks to the higher traceability of all the transactions.The increased use of credit cards will definitely reduce the amount of cash that people will carry and as a consequence, reduce the risk and the cost associated with that.
Cashless India is a move that has assumed significance in the backdrop of demonetisation of high value currency by the NDA government at the Centre. On November 8, 2016, Prime Minister Narendra Modi announced demonetisation of currency notes of Rs 500 and Rs 1000 and took the people by surprise. People standing in spiralling queues at ATMs and banks’ counters to exchange their old currency notes or withdraw cash became a familiar scene across the country.
However, the new cashless revolution ignited by this move has gradually started changing the mindset of people, who were earlier mostly dependent of currency notes only for doing transactions.
Benefits of cashless India
Cashless transaction does away with any hassle to carry cash.
It is in keeping with the worldwide trend. People need not carry any cash in various countries around the world as most of the transactions there are done electronically.
In digital transactions, you can view history of your expenses at one go which helps you to manage your budget easily.
Since cashless transactions are traceable, they invite payment of taxes, wherever applicable, thus ruling out use of black money.
As tax collections become easy through the cashless mode, it accelerates the pace of economic development, making it easier for the government to spend on education, health care, employment generation, infrastructure and the overall welfare of the people.
Increased tax collections lead to reduction and simplification of the tax structure.
Transfer of monetary benefits to the poor and the needy through bank transfer rules out their exploitation by the unscrupulous middle men.
Cashless transactions deal a body blow to counterfeit currency or distribution of black money through Hawala channels. It also cuts the supply of unaccounted money used in funding of criminal and terrorist activities.
It saves the government substantial costs in printing and circulation of currency notes.
Increased liquidity of money with the banks makes them lower their interest rates puts the huge amounts of cash deposited with them to some productive use.
Conclusion: A part of Digital India programme, the concept of cashless economy in India is centred around the vision of transforming the country into a society, which is digitally enabled and empowered by several modes of cashless transactions. Consequently, digital modes like credit/debit cards, mobile wallets, banks pre-paid cards, UPI, AEPS, USSD, Internet banking etc have gained in currency, leading to cashless India in near future.