IMPACT OF CASHLESS POLICY ON THE INDIAN ECONOMY

AUTHOR
Samrin Sulaiman
BBA L.LB. (Hons) 1st year
SAVEETHA SCHOOL OF LAW
SAVEETHA INSTITUTE OF MEDICAL AND TECHNICAL SCIENCES (SIMATS)
Chennai 600077

CO AUTHOR
Dr. SREEYA. B
ASSOCIATE PROFESSOR
SAVEETHA SCHOOL OF LAW
SAVEETHA INSTITUTE OF MEDICAL AND TECHNICAL SCIENCES (SIMATS)
Chennai 600077
Email ID: sreeyab.ssl@saveetha.com
Contact no. 9962250236
 IMPACT OF CASHLESS POLICY ON THE INDIAN ECONOMY

Abstract:
Implementation of a cashless policy in our economy would definitely boost up our economic
development by several times. However, there are certain factors to be considered like the
literacy rate of the people and the poverty rate. The main objective of the study is to know
about the impact of cashless policy on the Indian economy. The researcher has followed the
empirical research method using convenient sampling method. The sample size of the study
is 203. The result observed from the study is that most people are aware and also agree that a
Cashless Economy would help in achieving economic growth and development.

Keywords:
Cash, Cashless, Transactions, Economy, Corruption, Digitalisation

Introduction:
Transactions are very essential for the functioning of any economy. The earlier society was
completely based on currency of cash and coins. However, the concept of non-cash or
cashless transactions began in the 1990s. By 2010s, there was widespread digital payments
all over the country. This led to the development of PayPal, Apple Pay, and many other
modes of online payments. Cashless transactions include an automated or online operation
that may take place between two people, businesses, or organisations. This includes cheques,
demand drafts, debit and credit cards, UPI ( Unified Payment Interface) Applications, Mobile
Wallets, NEFT, RTGS, IMPS, USSD, ECS, QR codes, Net Banking, etc. To promote the
usage of cashless transactions, the government has taken several initiatives like the Digital
India Programme, DigiShala (Educational TV Programme), Demonetisation, etc. This paper
tries to study the opinion of people regarding cashless transactions.
The factors which affect the study are the literacy rates, the awareness
about the cashless transactions, the availability of adequate infrastructure and technology, the
internet connectivity in all areas (urban and rural) and also the poverty rate. In recent times,
the Paytm founder, Vijay Sharma made comments that it is impossible to implement a
cashless economy in India. Contrary to that, UPI has achieved a new high so far, i.e, it has
achieved 1.32 Billion transactions which is worth Indian Rupees 2,21,995 crores. Bengaluru
is the most digitalized city which has 23.31% of digital transactions.
When compared to several countries all over the world, Canada
occupies the top position for cashless economy, with over 2 credit cards per person, and 57%
of the transactions are cashless. However, in India, 98% of the transactions are cash
transactions as it is a completely cash-based economy. Now, the Government has taken
several initiatives to encourage the usage of digital payments.

Objectives:
● To determine whether the public prefers cash or cashless transactions in Chennai,
Tamil Nadu.
● To examine whether the public faces any technical difficulties while carrying out
digital transactions.
● To determine the impact of cashless policy on the public.
● To understand the role of cashless policy in the reduction of corruption.

Literature Review:
M. Thirupathi (2019) has made a study regarding the effect of cashless
payments on the society. The author has tried to understand the importance of cashless
transactions. Some of the advantages are more comfort, waivers and discounts and proper
record of money to avoid corruption. Sivakami (2018) has examined the transition of the
country towards a less cash economy. Some of the factors that affect the economy include the
modes of transactions, expectance for the future of India, and the level of difficulty in online
transactions. At a national and individual level, 60% of the sample population is highly
discouraged due to transaction charges.
Madhu Gaba (2017) has investigated the feasibility of cashless means of
business transactions. Prospects and benefits of a cashless economy include reduction in tax
avoidance, curbs black money, etc. Pavneet Kaur (2019) has determined the challenges and
opportunities of a cashless economy. The challenges are high cash dependency, lack of
digital infrastructure, etc. Opportunities are corruption reduction, to reduce money
laundering.
Jayalakshmi (2016) has focused on the different methods of digital payments
available. This includes Banking cards, USSD, AEPS, UPI, mobile wallets, PoS, internet
banking, Micro ATMs, etc. Cashless society establishes a cashless economy, which is
advantageous in nature. Bindu Arora (2018) has studied the impact of cashless economy and
banks’ performance, with a SWOT analysis. Strengths: Key to financial inclusion.
Weaknesses: Reduction in interest rate. Opportunity: Competitive advantage Threats: Losing
rural customers.
Preeti Grag (2016) has determined the views of people on a cashless
economy. By the survey conducted, it was inferred that 88% of people know about the
cashless economy, 54% of people accept a cashless economy, 80% of people agree that it
would reduce risk.

Methodology:
The research method followed here is empirical research. A total of 203 samples have been
collected out of which all samples have been collected through convenient sampling method.
The sample frame taken
en here is public areas in and around Chennai, Tamil Nadu like
beaches, malls and parks. The independent variables are age, gender, educational
qualification, occupation and marital status. The dependent variables are transaction
preference, technical difficulties,
iculties, nation-wide
nation wide cashless policy and reduction of corruption.
The statistical tools used here are correlation and graphical representation.
Analysis:
Figure 1
Legend:
Figure 1 shows the gender and age distribution of the sample population in Chennai and their
Transaction preference, whether they prefer cash or Cashless Transaction.

Figure 2

Legend:
Figure 2 represents the gender distribution of the sample population in Chennai and their
Transaction preference , whether they prefer cash or cashless transactions.
 Figure 3

Legend:
Figure 3 represents the overall performance of the sample population regarding transaction
preference, whether they prefer cash or cashless transactions.
 Figure 4

Legend:
Figure 4 represents the age distribution of the sample populations and the technical
difficulties they face during cashless transactions.
 Figure 5

Legend:
Figure 5 represents the educational qualification distribution of the sample population and the
technical difficulties they face during Cashless transactions.
 Figure 6

Legend:
Figure 6 represents the age distribution of the sample population and their opinion on the
imposition of a nation-wide
wide Cashless Policy.
 Figure 7

Legend:
Figure 7 represents the occupation and gender distribution of the sample population and their
opinion on the imposition of a nation
nation-wide Cashless Policy.
 Figure 8

Legend:
Figure 8 represents the age and gender distribution of the sample population and their opinion
on the reduction of corruption due to Cashless Economy.
 Figure 9

Legend:
Figure 9 represents the gender and occupation distribution of the sample population and their
opinion on the reduction of corruption due to Cashless Economy.
 Table 1

Legend:
Table 1 represents the correlation between three variables which include dependent variables,
technical difficulties and the nation wide cashless policy, independent variable, educational
qualification.

Results:
Respondents belonging to the age group of 41-60 years have shown a higher preference
towards cash transactions, whereas respondents belonging to the age group of 26-40 years
have shown a higher preference towards cashless transactions. (Fig.1) Female respondents
have shown a higher preference towards cashless transactions, whereas, male respondents
have shown equal affinity towards cash as well as cashless transactions. (Fig.2) The pie chart
represents the overall preference of the sample population which depicts that the sample
population prefers both cash and cashless Transactions almost equally, with a slightly higher
preference for cashless transactions. (Fig.3)
The highest number of respondents belonging to the age group of 26-40 years have
responded that they do not face any technical difficulties while carrying out Cashless
Transactions. Very small number of respondents have told that they face technical difficulties
during Cashless transactions. (Fig.4) Post-Graduate respondents have largely responded that
they face technical difficulties sometime. A high number of the illiterate respondents have
largely responded that they have not yet carried out a Cashless Transaction. (Fig.5)
On a scale of 1-10, a large number of respondents belonging to the age group of 26-
40 years have given a rating of 6 to show their support for the imposition of a nation-wide
Cashless Policy. The lowest rating given is a 4 by respondents above the age of 60 years.
(Fig.6) When using the occupation and gender as independent variables, the highest rating is
a 7 given by the females employed in the private sector. The lowest rating is a 3 given by
unemployed males. (Fig.7)
On a scale of 1-10, measuring how far a Cashless Policy would be effective in the
reduction of corruption, the highest rating given is a 6 given by the male respondents
belonging to the age group of 26-40 years. The lowest rating given is a 3, given by the male
respondents below the age of 18 years. (Fig. 8) When comparing occupation as independent
variable, the highest rating given is a 6, largely by the self-employed males. The lowest rating
is a 4, given by unemployed males. (Fig.9)
Table 1 represents the correlation between educational qualification and
technical difficulty and nation-wide Cashless Policy, the Pearson correlation value for both is
less than 0.50, thus showing that they are less correlated.

Discussion:
Respondents belonging to the age group of 26-40 years have shown a higher
preference towards cashless Transaction when compared to other age groups. This could be
because as a younger generation, they have adapted and modernised themselves with the
updated technology. Also, it could be because these people generally belong to the working
people who find it more convenient to make Cashless transactions. (Fig.1) Female
respondents have shown a higher preference towards cashless transactions as they would feel
it more convenient to order the necessary household stuff and pay for it online without
stepping outside for cash. (Fig.2) The total preference for both cash and cashless transactions
is almost equal, even though there have been more initiatives for a cashless economy, this
could be because India is a country whose economy is a 95% cash based economy and thus, it
would take a while to transition to a cashless economy with adequate infrastructure and
technology. (Fig.3)
Respondents belonging to the age group of 26-40 years do not face technical
difficulties in carrying out Cashless transactions. This could be because they are well-versed
and educated enough to be able to carry out the digital payments. (Fig.4) Post-Graduate
respondents have largely responded that they face technical difficulties in carrying out
Cashless transactions. This could be attributed to their age as people, a bit old, find it difficult
to adapt to these digitalised and modernised practices.
On the whole, the respondents have given an average rating of 6 regarding
the support for the imposition of a nation-side Cashless Policy. This could be because many
of the respondents are aware regarding the pros and cons of a cashless policy and thus, they
support it only to a certain extent. (Fig.6) Respondents employed in the private sector support
the implementation of a nation-wide Cashless Policy more than others. This could be because
the IT industry which highly dominated the private sector, thrive on Cashless transactions.
(Fig.7)
The respondents belonging to the age group of 26-40 years largely believe
that a cashless policy would be effective in the reduction of corruption. This could be because
a majority of the people in this age group are educated and are also working, thus, they would
be able to effectively evaluate its role in corruption, when compared to the other respondents.
(Fig.8) The self-employed males highly believe that a cashless policy would reduce
corruption. The above reason could be attributed to this. (Fig.9)
It was also found that the variables of technical difficulties and the nation-
wide Cashless Policy are not related much to the educational qualification of the respondents.
(Table 1)

Limitations:
One of the major limitations of the study in the sample frame. There is a major constraint in
the sample frame as it is limited to a small area. Thus, it proves to be difficult to extrapolate it
to a larger population. Another limitation is the sample size of 203 which cannot be used to
assume the thinking of the entire population in a particular country, state, or city. The
physical factors have a larger impact, thus, limiting the study.

Conclusion:
Based on the results of the analysis done, it has been found that most of the people are aware
about Cashless Economy and various modes of digital payments that can be carried out. They
also show a good amount of support toward a Cashless Economy. However, there is a small
fraction of people who do not support it due to the lack of knowledge and infrastructure.
Thus, it is necessary that the Government conduct more awareness camps and classes in order
to educate the people regarding cashless transactions in all areas, especially rural areas. It is
also imperative that the Government build the adequate infrastructure like banks and e-
service centers and provide the technology required to implement the Cashless policy.
Internet connectivity must also be improved in all the areas. It’s known that India, having a
largely cash-based economy would take time to transition into a Cashless Economy.

References:
● M. Thirupathi, Dr.G. Vinayagmoorthi, Dr. SP. Mathiraj, Effect of Cashless Payment
Methods: A Case Study Perspective Analysis, International Journal of Science and
Technology Research, Vol 8, Issue 8, August 2019, ISSN: 2277-8616, PP: 394-397
● R. Sivakami, Raksha M Bhat, A Study on Cash, Less Cash, and Cashless Economies-
The Indian Scenario, International Journal of Management, IT & Engineering, Vol 8,
Issue 8, August 2018, ISSN: 2249-0558, PP:58-69
● Dr. Madhu Gaba, Dr. Manisha Nagpal, Cashless Economy: Problems and Prospects,
International Journal of Engineering Research and Technology, Vol 5, Issue 11,
ISSN: 2278-0181, April 2018
● Pavneet Kaur, Cash to Cashless Economy: Challenges & Opportunities, International
Journal of 360 Management Review, Vol 7, Issue 1, April 2019, ISSN: 2320-7132
● M.Jayalakshmi, G. Venkateswarlu, Cashless Economy in India: Challenges and
Benefits, International Journal of Engineering Technology Research & Management,
Vol 2, Issue 7, ISSN: 2456-9348
● Bindu Arora, Neha Kaushik, Cashless Economy: A Key to Digital Proliferation in
Indian Banks, International Journal of Creative Research Thoughts, 2018, ISSN:
2320-2882
● Preeti Garg, Manvi Panchal, Study on Introduction of Cashless Economy in India:
Benefits and Challenges, IOSR Journal of Business and Management, Vol 19, Issue 4,
April 2017, ISSN: 2319-7668, PP:116-120

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