FROM CASH ECONOMY TO LESS CASH ECONOMY
From cash economy to LESS CASH ECONOMY----The government has been sowing the seeds of a cashless economy:
o In 2014, the government launched the Jan Dhan Yojana.
o In 2016, the government approved the guidelines for promoting payments through digital means.
The best way to reduce corruption and black money in the economy is to move to electronic transfers which needs universal banking access and facility.
The idea of a cashless economy is a revolution from the fiat money to digital money with increasing transparency of the flow of cash.
Advantages of a Cashless Economy---
In India only 10-15 per cent of the population is estimated to have ever used any kind of non cash payment instrument, compared to 40% of people in Brazil and China.
As of 2014 India’s ratio of currency in circulation outside of banks to GDP was 11.1% which is higher than other emerging economies like Russia, Mexico and Brazil.
Cashless society offers the government and the public many advantages:
o Convenient mode of payment: The cashless economy offers enormous benefits including reduction in transaction cost of carrying and doing business in cash.
o Lower risk: With proper cyber security, online payment is relatively risk free, whereas there are always safety issues with physical cash.
o Reduction in the cost of printing money: In 2015, printing currency cost the RBI Rs 27 billion. The cost can be reduced if the economy moves towards a cashless economy.
o Decrease in crime rate: Many anti-social and illegal activities like drug trafficking,prostitution, terror financing and money laundering are carried out only in cash. A cashless
economy will make it difficult to carry out such operations.
o Good for the banking sector: once people get used to digital payment and transfers, there would be less demand for cash holding or cash hoarding; this would leave more cash in the
banking system and thereby enable more savings.
o Transparency and Monitoring: Cashless transactions can be easily monitored by the government. Therefore, tax evasion would be difficult and would enhance revenue collection.
Government expenditure will increase in the direction of development process, as there is a possibility of increase in transparency and the flow of revenues.
Digital financial transactions can prove to be an effective means of curbing the large parallel economy in India.
It would make book keeping easier and increase the tax base, and substantially reduce the need to carry cash and the risk of physical theft. Sweden is one of the top five cashless economies in the world. It has already adopted effective
policies to facilitate transactions using mobile or plastic payments through digital infrastructure.
Sweden is the first country to promise to go 100% cashless by 2020, and leads the race to become a cashless society.
As on December 2015, the population of Sweden was estimated at 9.85 million people literacy was almost 100%. India had a population of 1,260 million; literacy was only 75%. The population of illiterate people in India was almost 30 times the entire population of Sweden.
It is difficult for India to think along the lines of Sweden; nonetheless, India has started the movement towards cashless economy now.
The RBI and commercial banks need to come up with an innovative idea that enables cashless transactions which is safe and easy to perform.
Challenges Ahead
In rural areas, there are only 20.8% of ATMs of the public sector banks and 8.5% of the ATMs of private sector banks. So it is difficult to find an ATM in rural areas.
E-wallets and mobile payment systems need a smart phone and an internet connection, but less than a quarter of the population owns a smart phone.
Fast and reliable internet connection is expensive and it is difficult to find public wifi hotspots and mobile phone battery charging stations.
Issues like cyber security and online frauds are key concerns.
In a democratic system of government, political party funding is one of the major sources of corruptions. Therefore, any attempt at fighting corruption that does not first involve bringing transparency to the funding of political parties cannot be meaningful or successful.
o In 2014, the government launched the Jan Dhan Yojana.
o In 2016, the government approved the guidelines for promoting payments through digital means.
The best way to reduce corruption and black money in the economy is to move to electronic transfers which needs universal banking access and facility.
The idea of a cashless economy is a revolution from the fiat money to digital money with increasing transparency of the flow of cash.
Advantages of a Cashless Economy---
In India only 10-15 per cent of the population is estimated to have ever used any kind of non cash payment instrument, compared to 40% of people in Brazil and China.
As of 2014 India’s ratio of currency in circulation outside of banks to GDP was 11.1% which is higher than other emerging economies like Russia, Mexico and Brazil.
Cashless society offers the government and the public many advantages:
o Convenient mode of payment: The cashless economy offers enormous benefits including reduction in transaction cost of carrying and doing business in cash.
o Lower risk: With proper cyber security, online payment is relatively risk free, whereas there are always safety issues with physical cash.
o Reduction in the cost of printing money: In 2015, printing currency cost the RBI Rs 27 billion. The cost can be reduced if the economy moves towards a cashless economy.
o Decrease in crime rate: Many anti-social and illegal activities like drug trafficking,prostitution, terror financing and money laundering are carried out only in cash. A cashless
economy will make it difficult to carry out such operations.
o Good for the banking sector: once people get used to digital payment and transfers, there would be less demand for cash holding or cash hoarding; this would leave more cash in the
banking system and thereby enable more savings.
o Transparency and Monitoring: Cashless transactions can be easily monitored by the government. Therefore, tax evasion would be difficult and would enhance revenue collection.
Government expenditure will increase in the direction of development process, as there is a possibility of increase in transparency and the flow of revenues.
Digital financial transactions can prove to be an effective means of curbing the large parallel economy in India.
It would make book keeping easier and increase the tax base, and substantially reduce the need to carry cash and the risk of physical theft. Sweden is one of the top five cashless economies in the world. It has already adopted effective
policies to facilitate transactions using mobile or plastic payments through digital infrastructure.
Sweden is the first country to promise to go 100% cashless by 2020, and leads the race to become a cashless society.
As on December 2015, the population of Sweden was estimated at 9.85 million people literacy was almost 100%. India had a population of 1,260 million; literacy was only 75%. The population of illiterate people in India was almost 30 times the entire population of Sweden.
It is difficult for India to think along the lines of Sweden; nonetheless, India has started the movement towards cashless economy now.
The RBI and commercial banks need to come up with an innovative idea that enables cashless transactions which is safe and easy to perform.
Challenges Ahead
In rural areas, there are only 20.8% of ATMs of the public sector banks and 8.5% of the ATMs of private sector banks. So it is difficult to find an ATM in rural areas.
E-wallets and mobile payment systems need a smart phone and an internet connection, but less than a quarter of the population owns a smart phone.
Fast and reliable internet connection is expensive and it is difficult to find public wifi hotspots and mobile phone battery charging stations.
Issues like cyber security and online frauds are key concerns.
In a democratic system of government, political party funding is one of the major sources of corruptions. Therefore, any attempt at fighting corruption that does not first involve bringing transparency to the funding of political parties cannot be meaningful or successful.
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