FROM A CASH ECONOMY TO A LESS CASH ECONOMY

Empowerment of Women- Government Perspective
Introduction :-
            A cashless economy runs on credit or debit cards, electronic funds transfer, or online shopping instead of cash.
            The idea of a cashless economy is actually a revolution from the fiat money to digital money, generally adopted with the aim of curbing the flow of black money and increasing transparency of the flow of cash.
Facts :-
  1. Less than 5% of all payments happen electronically.
  2. In the Financial year 2015, RBI spent `27 billion on just the activity of currency issuance and management.
  3. In 2016 – more than 68% of the transactions in India were settled in cash, one of the highest in the world.
  4. Currency in circulation in India is higher than many developing and developed countries.
  5. In 2015, only 50% of the Indian population had a card.
  6. In India, only 17% of adults had smart phones in 2016
  7. 26% of the individuals were using the internet in 2015.
  8. The fixed – broadband subscription per 100 inhabitants is only 1.34 for India.
  9. In rural areas, there are 20.8% of a TMs of public sector banks and of the state bank groups and 8.5% of the ATMs of private sector banks.
Advantages of less cash economy:
  • Convenient mode of payment
  • Lower Risk : –
    • With proper cyber security online payment is relatively risk-free,
  • Reduction in the cost of printing money,
  • Decrease in crime rate
  • Many anti-social and illegal nativities like drug trafficking, prostitution, financing of terrorism and money laundering are carried out through in cash.
  • A cashless economy will make it difficult to carry out such operations.
  • Good for the banking sector:-
  • More savings in banking because of less cash demand.
  • Transparency and monitory :-
  • Cashless transaction can be easily monitored by the government. Therefore, tax evasion would be difficult and would enhance revenue collection.
  • It might help curb black money by reducing tax evasion.
  • In a cyclical pact it will also reduce real estate price because of curbs on black money as most of the black money is invested in real estate prices which inflates the prices of real estate markets.
  • Universal availability of banking services to all as no physical infrastructure is needed other than digital equipment.
  • Digital payments bring in grater efficiency in welfare programmes as money is wired directly into the accounts of recipients.
Challenges :-
  1. Cyber security, ensuring security of online transaction
  2. Digital divide – very low internet penetration.
  3. It is difficult to find an ATM in rural area.
  4. India has one of the lowest numbers of point of sale terminals, per million inhabitants in the country.
  5. Electricity problem.
  6. Extra charges on online Transaction by Banks.
  7. Currency dominated economy
  • High level of cash circulation in India. Cash circulation amounts to around 13% of India’s GDP.
  1. ATM use is mainly for cash withdraw’s and not for settling online transactions:
Nearly 92% of ATM cards are used for cash withdrawals.
 
Government Measures :-
  1. PM Jan Dhan Yojana
  2. Lucky Grahak Yojana for consumers and Digi Dhan Vyapar Yojana for merchants to incentivising digital payments.
  3. Vittiya Saksharta Abhiyan
  • To encourage people to adapt to digital economy.
  1. BHIM (Bharat Interface for Money)
The Aadhaar based mobile payment application will allow people to make digital payment directly from their bank accounts.
  1. Repay Card:-
  • Indian version of a credit or debit card. The National payment corporation of India (NPCI) launched Rupaycard under the Jan Dhan scheme. Bank provides every account holder a Rupay debit card with `1 lakh accident insurance.
  1. Aadhaar payment app:-
  • It links the Aadhaar Card of an individual to his/her bank account.
  • One special feature is that this app can be used by a person to make payments without any phone.
  1. Amendment to the payment of wages act to provide for crediting the wages in the bank account of the employees or payment through cheque – there by making the transaction
Measures to be taken :-
  1. The present level infrastructure, particularly the technological infrastructure in India needs to be upgraded at a fast pace to support the ‘less-cash’ initiative of the Indian government.
  2. Neutrality of mode of payments:-
  • Payments through cards or digital methods should not be costlier for the payer as compared to use of cash payments.
  1. Security of information:-
  • Electronic methods for making payment ensure that all transactions and customer information is recorded there is threat to privacy.
  • There should be a strong system for ensuring mitigation of risks and a fast track grievance redressal mechanism.
  1. Setting – up a robust physical and technological infrastructure
Ex : – smart phones, internet, broad band connectivity, POS etc.
  1. Lower tax : –
  • It is important that taxes on information technology devices such as smart phones and tablets are reduced.
            Ex :- For electronic items are likely to attract 28% GST.
  1. Robust e-commerce policy:-
The country must have a strong e-commerce regulation which ensures consumer protection for cashless payments.
Conclusion :-
            The Indian government has taken the right step to move towards a ‘low-cash economy’.  However, experiences of other countries show that a ‘less–cash economy’ needs infrastructure and supporting regulations. To move towards a “less-cash economy” government financial institutes and business have to work together.
For More Details : Vetrii IAS Academy Chennai

Leave a Reply