• 17 Mar, 2017 12:19 PM  
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On 8th November 2016, our honourable prime minister of India,ShriNarendraModi made an announcement that the 500 and 1000 rupee notes would be banned. With this announcement 86% of currency notes in India were just mere pieces of paper. India’s demonetization scheme was planned to curb corruption. But as the process continues it is more about transitioning India to cashless economy.

A cashless economy is one in which all the transactions are done using digital means i.e., the circulation of physical currency is minimal. Up until this campaign India is incredibly cash centric. There are many successful countries who have transformed their cash driven economy into cashless economy. Sweden is shaping up to be the first country in the world to start its journey towards a cashless economy. Not to go far, recently Manipur's KarangIsland has become India's first cashless island where all economic transactions will be carried out through digital mode.

The move towards a cashless economy is heavily debated and controversy prone.

Potential benefits: Efficiency and Transparency: A transparent economy is a true economy of any country. The biggest advantage of cashless economy is all its transactions are transparent, fair and traceable. An economy to flourish in real term, transparency plays an inevitable role.
Curbs generation of black money: Black money is those unaccounted money which is earned from an illegal sources and is beyond the purview to the tax authorities. Cashless economy binds such black money hoarders and dealers to get rid from such attitudes and compel them to use white money and pay their due taxes. Not only this, terrorism, abduction, theft etc. can also be curtailed as black money was aggressively used to fund such illegal activities.
Currency counterfeiting: The biggest disadvantage of cash driven economy is duplication of its currency and circulating in different markets. It was observed that 20% of the total cash circulating in Indian economy are duplicate forged currencies. And such counterfeiting activities are carried out in all over the world. The cashless economy is the best solution to tackle such menace by using digital mode for all transactions.
Convenience: Ease of conducting financial transactions is probably the biggest motivator to go digital. You have the freedom to transact whenever and wherever you want. Lower risk:It is easy to block a credit card or mobile wallet remotely but impossible to get your cash back.
In 2015 RBI spent 27 billion on activity of currency issuance and management. This could be avoided. Paves way for universal availability of banking services.
Speed and satisfaction of operations for customers as no delays and queues, no interactions with bank staff required. There will be greater efficiency in welfare programmes as money is wired directly into the accounts of recipients.
Cybercrimes: Increasing cybercrimes is surely a threatening loophole in cashless transactions. Hackers leapt out customer's account and transfer money to their account. No uniform protocol in cyber security jerk a nerve wracking fear among masses for using digital mode of transactions.
Breach of confidentiality: Recently a breach in financial data affected several banks security features caused panic among masses. Many customers account and ATM cards were blocked by bank caused heavy loss to banks and disruption among people.
Lack of awareness: Lack of education, basic amenities and awareness of digital transactions is major hurdles for a cashless economy.
Feasibility: The feasibility of cashless economy is undoubtedly a question also. For petty transactions like paying conveyance, buying groceries and daily goods etc. are not feasible all the time. In contrary to availability of digital mode for transactions, some people are addicted to cash transactions and reluctant towards digital mode.
Government’s role:

Government has launched an official channel "DigiShalla”, an initiative taken by government of India under the Ministry of Information Technology and Ministry of Human resource development in the state of Haryana also adds to this.

E-Vendors have been installed in Gujarat and Chhattisgarh to promote cashless transactions in day to day goods and services.VISHAKHA (VitiyaSakhsharataAbhiyan) has been launched the very last year to promote digital literacy.

Government is giving discounts for going digital: wavier of service tax of 15% on digital transactions, 0.75% discount on digital purchase of fuel, 0.5% discount on monthly and seasonal suburban railway tickets, 10% discount on toll payment.

The central government through NABARD is extending financial support to eligible banks for deploying 2 POS devices each in 1 lakh villages. Rupaykisan cards are issued to kisan card holders to enable them to make digital transactions.

Way Forward Despite of such steps, India still lags a lot behind to be cherished by cashless economy due to illiteracy, less knowledge about technologies. Government rather taking all of sudden such step, should have to wait for at least 2 to 3 years to at least acquaint people about such initiative.Tax rebates for consumers and for merchants who adopt electronic payments. Electronic payment infrastructure should be made completely safe and secure to minimise cybercrimes.

Undeniably, cashless economy is the way ahead but we need to take calculated and not hasty steps to march forward.

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