Sunday, January 8, 2017

Can India really Become Cashless and Digital?

In the lastarticle, we saw why moving toward a digital and cashless economy is beneficial for our country. To give you a quick summary, moving toward a digital economy helps bring in more transactions under the official list and contribute toward GDP as well as governments tax revenue. Also, the cost of printing and maintaining the cash infrastructure comes down. That all seems like a good benefit. But, the next question we all have in mind is, can we really do that?

Many people are quick to point out our population, infrastructure and many other reasons to say that we cannot and should not move toward a Digital & Cashless Economy. I hope that by the end of this article you get an idea of whether this move is feasible or not.

Before we begin: As with many of the recent articles, this is NOT a Politically Motivated article. The contents of this article are entirely my personal views and is not aimed at supporting or opposing any political party.

Considering India’s Size and Population – Is this Move really Feasible?

People who are talking negative things about this move towards a cashless economy in India citing our size, population etc to say that it is an ill-advised idea. However, they conveniently ignore the fact that a country that is larger and more populated that us has successfully pushed towards digital/cashless transactions and the results show on their GDP.

Yes, am talking about China.

In the past few years, China has embraced the change toward a more digital and cashless society and have been making huge strides toward the same. The reasons quoted by the Chinese Government officials were pretty much similar to what our government has said. They want to reduce black money, reduce the size of shadow economy and reduce illegal activities like hawala, terrorist financing, money laundering etc.

Below are some key highlights that you need to know about China’s move toward a Cashless & Digital Society:
1.     Non-cash payments have grown by about 40% last year and China has now moved into 4th place in the world for Non-Cash payments after US, Europe and Brazil.

2.     China has approximately 4 billion cards issued to its citizens by Banks & other financial institutions. Considering their population, that’s approximately 3 cards per person.
3.     Chinese Government is encouraging citizens to use non-cash payments because it reduces the cost of printing, circulating and handling bank notes. It also helps in the battle against tax evasion and corruption as well as other illegal activities.
4.     In order to accelerate the use of non-cash payments, the Chinese government has increased the availability of Point of Sale (POS) machines and also opened up a domestic card payments system to the public.
5.     Other pre-paid and electronic wallets such as WeChat, Mi Wallet and Alipay are becoming extremely popular in china because people are able to shop and pay for services conveniently using their smart phones.

Not just China, many other countries in Asia like Thailand, Korea etc. are pushing toward a cashless economy to achieve the very same benefits listed down by our Government.

Asking the question again – Considering India’s Size and Population, Is this move to Digital and Cashless Economy Really Feasible?

Yes, I think so.

But, just scroll up and read points 3, 4 and 5 on the Chinese government’s aim at promoting digital transactions. Isn’t our Government doing the same thing? They are encouraging citizens to use digital and cashless payments. They have introduced a domestic card payments system and other electronic payment systems are becoming popular. Plus, the government has rolled out a lot of incentives to the citizens to use the digital & cashless payment modes (Will be the next article). 

If a country that is bigger and more populous than ours can do, we definitely can. No one can deny that this transition will be difficult and will have many problems when it gets implemented. Considering our size and population it would take a miracle for such a large change to happen smoothly.

Of course, it would require some discipline on the part of our government, government & bank officials as well as Citizens if we want this initiative to be a success.

Hope this initiative is a success and further helps India’s growth as a global economic powerhouse.

What are your thoughts on this article? Sound off in the comments section. Note that vulgar language or politically affiliated comments will be Moderated and WILL NOT be Published.

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