Cashless economy- Reality or pipe dream?

Aditya gogoi

Immediately after the announcement of demonetisation policy at the

midnight hours of 8th of November, there is a major halt on overall activities of
trade and business. With people scrambling to exchange their old currencies,
the use of plastic money like debit card end credit card as well as the use of
internet banking being touted as the way forward. Even the Prime minister
Narendra Modi and Finance Minister Arun Jaitley urging public to “go digital”
and thereby trying to initiat the tragic and painful process of converting the
nation into a cashless economy. Now, what does exactly mean by a cashless
economy? It is nothing but a system of using plastic money- debit card and
credit card- and digital services through intrnet at the transaction place instead
of using physical cash currencies.
The premier question arises after the announcement of the agenda of
“cashless economy” and “go digital” is that, has Indian Economy attained that
stage of maturity to enter into a regime of cashless system. The available data
makes enough sense to put a straight forward “No” as the aswer to this million
dollar question.
Cards are used in three ways: to make payment online, to withdraw and
deposit cash at ATMs and for swiping at point of sale (POS) terminals at
marchant establishment. But, moving the cash transaction to plastic money
would require a large penetration of POS terminals across India. Increase in
number of school doesnot mean increase in number of educated people.
Likewise increase in the number of cards on use is not the reflection of the
numbers of Indian using these cards. A large number of people, especially in
urban Indian, have multiple cards. POS terminals use mobile internet to enable
transaction. Mobile internet pentration remains very fragile in rural India.
Furthermore, per-transaction bank charge also makes the online transaction
costlier than the cah transaction. Adding salt to the wound, lower financial
literacy among poor and rural population turns it problematic to push the use
of plastic money and digital transaction facility on wider scale. The RBI data
itself revealed that the businesses where transactions are mostly made by
women and poorer section of public, are tended to use plastic money in a lower
volume.
There are many other reasons why people prefer cash and this may have
nothing to do with sinisetr motives like hoarding or ammassing ill-gotten
wealth. Cash transactions are not necessarily immoral transaction. The wonder
of cah is that it just works smoothly. Even the remotest location of India, where
the government mght not present with all its armoury, it writ runs in the forms
currency that people use to do business on a daily basis. One generally donot
expect a small vegetable seller of a remote village sitting with a card swiping
machine within his afford.
The informal sector, which accounts 45% of the nation’s Gross Domestic
Product (GDP) and more than 80% of the total employment generated, rides
mostly on cash. Drying up of cash only aggravates the damage across the
informal sector as well as the small and mediam scale industry segment. The
activities in trade and manufacturing bodies have been reported a drope by
almost 50% after the monetary shock.
 The economic cost of money supply crunch and the difficulties in using
plastic money on a larger scale across a wide geography in India makes it
detrimental for India to go cashless. Given the Indian reality, telling people to
go cashless is just like telling them to have cake when breads are unavailable.