Future and Scope of Cashless Economy in India [Infographic]

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Technology is advancing in a rapid manner so is the way of functioning of human beings in the society. Commerce is undoubtedly the pillar upon which the premise of a strong human civilization stands. The sudden cancellation of 500 and 1000 rupee note in India has evoked the question of a cashless society. This is so because whenever the transactions in the society go online, the chances of black marketing and money laundering reduces to a higher extent. From the perspective of Indian economy, the concept of going totally digital is very difficult to execute in hard core reality. India is not a typical ultramodern and highly developed country like USA, European countries or any other powerful state in the world. The term cashless means the exchange of funds by cheque, debit and credit card or any sort of electronic methods rather than direct cash. There is both advantage and disadvantage in going totally cashless in our economic infrastructure.

Advantages of cashless economy in India

The biggest advantage of a cashless society is that keeping track of economic transactions through digital modes help to control black marketing practices. Black marketing or underground economies cause severe damage to the national economies. There is also a significant point in this regard that it is very difficult to carry out illegal transactions through online methods of commerce and trade. There always lies a risk to conduct criminal transactions through improper payment of due taxes in a totally cashless society. Economic violations also get highly reduced through the commercial practices done digitally. From a different perspective, it can also help to reduce all kind of financial robberies and forgeries. Going cashless gives the highest amount of security to all the major pillars of the economy. From the perspective of our country, our economy stands on the pillars of three major institutions. These institutions include the banking system, insurance system and security exchange boards. All these organizations can get rid of all financial loopholes and challenges through a digital mode of operation and management.

Challenges of a cashless economy in India

Indian economy is trying its best to move towards a cashless economy through more and more dependence towards digital tools. Though the approach is positive, but still there lies certain challenges to execute this step in hard core reality. The challenges in this regard include -
  • Priority of cash- India is a kind of mixed economy where there is the highest use of cash in the world. A major proportion of payments done in India are through cash only. High use of cash in this country is only helpful to the informal economy and not by any means for the formal one. The mindset of public in this country is such that people are still not tech savvy and their dependence on mobile phone and internet for commercial purpose is still very minimal.
  • Usage of ATM is mainly through cash mode- From the perspective of ATM cards, a major proportion of this financial instrument are employed for cash withdrawals and nothing else. A very low level of digital payment is done through this entity which is also an issue of orthodox mindset of the common man.
  • Restricted availability of point of sale terminals- The availability of point of sale terminals in India is still majorly restricted to urban and semi urban areas. More and more availability of these POS terminals in the hard core city area is essential to make people aware of digital commerce and trade.
  • Crisis of mobile internet penetration- Digital transactions need solid support of internet connectivity. From the perspective of Indian infrastructure, there is still poor internet connectivity in rural areas and even in areas growing as extensions of major cities.
  • Hesitation of public for digital transactions- India has unfortunately poor literacy level in rural areas. This is the biggest impedance on the part of government to impose digital economy in the country. Lack of even basic knowledge in language, science and technology is becoming a great handicap for people to get accustomed with the digital movement. Common man in India living far away from the glitz and glamour of the mega cities is fearful about carrying their everyday economic life digitally.
Demonetization was recently introduced as a major step to curb the enemies of our economy. This is a two way process through which black marketing can be controlled and our economy can gradually move towards a cashless format. Although the decision is undoubtedly brave but the preparation to do such a thing is not always proper to make the common man get relief from its ill effects. The entire country was taken by storm when the decision to rule out Rs 500 and 1000 notes was imposed on the country. There was surprise, apprehension and concern amongst people as well as industries over how the economy would function without the notes that had made up almost 86% of the total currency. But there was one sector of the industry that got the opportunity of a lifetime as a consequence of this decision- Mobile Wallet and E-Commerce companies. These companies literally cashed in and grabbed this chance with both hands, resulting in an exponential growth of the mobile transactions scene.

Role Of Mobile Wallets in Cashless Economy

Soon enough, the jingle ‘Paytm Karo’ was on every tongue and mobile wallets filled in for the shortage of cash. The convenience, handiness and ease of access they provide, combined with their simple and user-friendly interfaces meant that anybody who owned a smartphone, which was nearly everyone, could use it. So began the cashless revolution and street vendors, grocers, as well as wealthy enterprises jumped on the band wagon. This gave rise to an increase of 435% in traffic, 200% in app downloads and 250% in overall transactions, just for Paytm, the country’s largest mobile wallet. Closely following Paytm is Mobikwik, another mobile wallet that has experienced a similar boom in its trades and if the latest trend is anything to go by, this upsurge is not just limited to being a post-demonetization constraint but a lasting habit. The number of internet banking and credit card users has already been outdone by the number of mobile wallet users by a significant figure. However, in order to make sure that mobile wallets and cashless transactions don’t become a thing of the past, certain measures need to be taken by the government as well as these companies. Nevertheless, mobile wallets have emerged as the stepping stones towards making the Indian economy a largely cashless one and all things considered, their accessibility and lucrative deals have the capability to ensure that people stick to mobile wallets in the foreseeable future. From our extensive discussion on Indian economy going cashless, we can only infer and remark that there needs a solid preparation both from the sides of the common man and the financial institutions to create an awareness platform for making our society switch to digital commerce gradually and with no hesitation from both mental and socio economic perspectives.
Cashless infographic
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