The idea of a country going cashless is very exciting, since the best way to get rid of black money is to get rid of cash. One of the most exciting things that's been happening in our country is the coming together of all forces that are needed for a country to go cashless. There are government's financial inclusion programmes complimented by the fact that RBI has been issuing licences to payment banks, small finance banks and financial technology companies like never before, there are mobile wallet companies competing aggressively to attract customers, there's the Unified Payment Interface, authentication has been simplified through Aadhar, more people can afford smartphones now and there are network providers reducing data charges, eyeing higher market share. Recently, as part of an assignment in my MBA course, I roughly predicted that India would become a cashless economy in the next 10 years. Although I'm being over-optimistic about this, I really think India has what it takes to achieve this.
There are real challenges though. There is the reluctance and in most cases, the inability to embrace the opportunities to go cashless. Debit cards have been around in our cities for a fairly long time now, but over 80% of the times, they are used to draw cash from the ATM machines. We all know people who are still very reluctant to swipe cards instead of paying as cash. We also know folks who don't even use their cards. They go to the bank in the beginning of the month, withdraw cash as much as they want for the month and manage their household expenses. To be fair, the facilities for cashless transactions aren't great either. Most places do not accept cards because those transactions cost them more. In the tier-II towns and in rural areas, the situation is even worse.
Internet penetration in India is around 19% and this is a major hurdle for India to go cashless. The government and the private sector have to work together to swiftly increase internet penetration, and as the penetration improves, incentivising cashless transactions, improving internet banking literacy, continuing to aggressively improve access to banking for everyone and many more programmes can strengthen the eco-system that is already there now, though in its infancy.
The hardships that people have been facing because of the recent demonetization show how dependent we as a country are on cash. Over 80% of the transactions happen via cash. The long queues outside the ATMs are depressing, not just because they show how ill prepared the government and the banks were for such a move, but also because those queues also mean that so much of cash is coming back to the market in the form of new notes. How much ever this government and its ardent fans tell you that this move would curb black money, as long as there's so much cash in the economy, black money in various forms will continue to haunt us. Unless we do everything that it takes to reduce dependency on cash as fast as we can, the recent exercise that has been wrongly and popularly called "demonetization" will not just be proved futile, but will only be remembered as something that caused great inconvenience to honest citizens.
Apparently, it took about a year of planning before the PM announced that the old notes are scrapped. While this thrilled a lot of us for the apparent secrecy, I wonder what the preparation was about. Perhaps the right preparation wouldn't have led to people dying. It wouldn't have risked rural consumption, which is already low. It wouldn't have caused so much of distress to people who had nothing to do with black money. The government has got its timing terribly wrong, but it isn't too late. The new notes for sure will proliferate in the economy and the priority for the government should be to speed up the transition to cashless economy. Next time a PM goes on air to announce that our notes are worthless, we should be able to just shrug our shoulders and say "Who needs cash!"
Internet penetration in India is around 19% and this is a major hurdle for India to go cashless. The government and the private sector have to work together to swiftly increase internet penetration, and as the penetration improves, incentivising cashless transactions, improving internet banking literacy, continuing to aggressively improve access to banking for everyone and many more programmes can strengthen the eco-system that is already there now, though in its infancy.
The hardships that people have been facing because of the recent demonetization show how dependent we as a country are on cash. Over 80% of the transactions happen via cash. The long queues outside the ATMs are depressing, not just because they show how ill prepared the government and the banks were for such a move, but also because those queues also mean that so much of cash is coming back to the market in the form of new notes. How much ever this government and its ardent fans tell you that this move would curb black money, as long as there's so much cash in the economy, black money in various forms will continue to haunt us. Unless we do everything that it takes to reduce dependency on cash as fast as we can, the recent exercise that has been wrongly and popularly called "demonetization" will not just be proved futile, but will only be remembered as something that caused great inconvenience to honest citizens.
Apparently, it took about a year of planning before the PM announced that the old notes are scrapped. While this thrilled a lot of us for the apparent secrecy, I wonder what the preparation was about. Perhaps the right preparation wouldn't have led to people dying. It wouldn't have risked rural consumption, which is already low. It wouldn't have caused so much of distress to people who had nothing to do with black money. The government has got its timing terribly wrong, but it isn't too late. The new notes for sure will proliferate in the economy and the priority for the government should be to speed up the transition to cashless economy. Next time a PM goes on air to announce that our notes are worthless, we should be able to just shrug our shoulders and say "Who needs cash!"
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