{"id":9325,"date":"2017-03-03T12:25:42","date_gmt":"2017-03-03T12:25:42","guid":{"rendered":"https:\/\/www.oliveboard.in\/blog\/?p=9325"},"modified":"2017-03-08T06:01:32","modified_gmt":"2017-03-08T06:01:32","slug":"cash-to-cashless-digital-india-economy-analysis-upsc-ias-current-affairs-gk-exam-study","status":"publish","type":"post","link":"https:\/\/www.oliveboard.in\/blog\/cash-to-cashless-digital-india-economy-analysis-upsc-ias-current-affairs-gk-exam-study\/","title":{"rendered":"India’s Movement Towards A Cashless Economy: An Analysis"},"content":{"rendered":"

India, is a land of contradictions and the best example of this would be the existence of two different worlds in the same nation: India and Bharat. <\/span><\/p>\n

While, India is tech and Internet savvy, our Bharat is far behind. It even lacks the basic amenities. While India is talking about bullet trains and hyper-loops, one can still find people earning their livelihood from cycle-rickshaws in ‘Bharat’.\u00a0 Given such a wide spectrum of disparity, the fact that 90% of our workforce is in the unorganized sector, comes as no shock.<\/span><\/p>\n

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And amidst all these disparities, Prime Minister Modi announced the demonetization of Rs. 500 and Rs. 1000 notes. The demonetization step has had both positive and negative impacts on the economy. While many see ‘curbing black money’ as the main goal of the demonetization process, they miss out on the most obvious result, which is – financial inclusion<\/strong> and shift towards a cashless economy<\/strong>.<\/span><\/p>\n

How Did Demonetization Give India A Nudge Towards Being A Cashless Economy?<\/strong><\/h6>\n

Let’s just say that the following data speaks for itself.<\/span><\/p>\n

Paytm witnessed 5 million daily usage post demonetization as against their average transaction of three million. It also registered 700% increase in overall traffic, and 1000% growth in the amount of money added to its account in the first two days itself.<\/span><\/div>\n
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Similarly, \u2018Ola Money\u2019 registered 1500% increase it its e-wallet.<\/span><\/div>\n
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India Is A Cash Obsessed Economy<\/strong><\/span><\/h6>\n

The Indian economy is cash based. So much, that, MNCs like Amazon had to incorporate ‘cash on delivery’, just to be able to tap into the Indian market.<\/span><\/p>\n

The rate of cash to GDP is the highest, i.e. 12.42% in India. Whereas, other large economies have average cash to GDP ratio of 5%. <\/span> In fact, in the year 2015, 78% of all consumer payments were in cash in India, whereas in US, it was 20% and in UK it was 25%.<\/span><\/span><\/span><\/div>\n
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India is the 4th largest user of cash in the world. And in this era of technology, this is not only backward, but also unscientific and ‘un’-economic.<\/span><\/div>\n
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Why Is Moving Towards A Cashless Economy Important?<\/strong><\/span><\/h6>\n

To put it in a straight forward manner – cashless economies tend to be less corrupt, and have lesser black money. Let’s examine these reasons in detail.<\/span><\/p>\n

1. Cash is costly.<\/em><\/span><\/h6>\n
A significant amount of time and effort is expended in shepherding them through the system and finally into the consumer\u2019s hands. RBI has spent Rs.32.1 billion just for printing the currencies that are in circulation. Add to it the costs of setting up and maintaining ATMs. Also, paper currency has a shelf life after which it is renewed. It is said that the direct cost of running a cash based economy is close to 0.25% of India\u2019s GDP.<\/span><\/div>\n
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2. Cash drives a shadow economy.<\/em><\/span><\/h6>\n
Cash transactions provide anonymity like no other mode of payment. They’re difficult to track. This leads to many evils, like – tax evasion, black money etc.<\/span><\/div>\n
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In 2007, currency in circulation was almost equal to bank deposits. But in the last three years, currency with Indians was more than the bank deposits by 50%. As per government data, the size of black money in India is Rs.15-16 lakh crores<\/span>. <\/span> This is the unaccounted money and was <\/span> being used to finance a shadow economy, almost running a parallel government that finances all illegal transactions. Most of it is used for financing terrorist activities<\/span>, illicit funding for elections, purchasing political decisions, betting, trafficking, and for hijacking democracy.<\/span><\/span><\/p>\n<\/div>\n

3. Future rewards : Financial inclusion + Increased tax revenues.<\/em><\/span><\/h6>\n<\/div>\n
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A cashless or a digital economy will require all the residents to have a bank account. This will lead to higher financial inclusion rates and will also help build a bridge between Bharat and India. Also, since digital transactions can be easily tracked, the incidences of tax evasion will reduce drastically and in the long term will help the common people in terms of better implementation of government policies.<\/span><\/div>\n
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Moving Towards A Cashless Economy Is Not A Cakewalk!<\/strong><\/span><\/h6>\n
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Source : Techstory<\/span><\/figcaption><\/figure>\n
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In this massive and bold step taken by the Indian government, there are many challenges that need to be overcome. The major challenges are as follows:<\/span><\/div>\n
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1. Inadequate infrastructure<\/span><\/h6>\n