The Modi government’s sudden blow upon India’s parallel economy is being interpreted as a push towards a cashless economy, which is expected to help improve tracking money flows and raise government revenues. Giving credence to this move is the 200 million RuPay cards issued under Jan Dhan Yojna, which strove to bring all those without bank accounts into the formal banking system. But is India ready for the transition to a cashless economy?
Kerala finance minister Thomas Issac is dismissive. “In India, the ratio of cash in circulation to GDP is 12 per cent, whereas in comparable economies it is 3 per cent. Ours is a cash intensive economy. The transition to a cashless economy will take a long time.”
In the post demonetisation scenario, only a small percentage of the population is relying on card or mobile transactions for daily expenditures or business activities. Major players in the digital transaction space are, however, taking heart from the sudden surge in usage and large numbers of new users.
“Cash is needed by merchants...