Sunday Special
By Prashant Sinha
New Delhi: Transactions without cash are still at a nascent stage as India makes headway to transform itself into a digital economy. At present eighty per cent people are dependent on cash transactions, which makes it difficult to assume that e-cash or digital banking will make immediate headway in the country. Actually the road to digitization of the economy is not as easy as it is being understood. The economy cannot be cashless simply by the arrangement of UPI, PPI, or mobile wallet. E-Cash has a long way to go.
While transactions without cash are aggresively being promoted by the present government, some surveys have attempted to measure the level of cash payments in the economy. Although many reports are only estimates, they provide some indication of cash usage and digitisation in the country and around the world. According to these estimates, cash still reigns supreme, not only in India but also in many other countries.
However, there is no denial of the fact that online payment channels are rapidly expanding. A report by World Pay showed that the use of digital payments is increasing in the Asia Pacific region and estimates that the e-commerce market in the region will grow at a Compound annual growth rate (CAGR) of 12 per cent between 2016 and 2021, with India as one of the key drivers.
COVID-19 pandemic too has given a big push to cashless transactions in India, and such transactions have indeed increased by a few percentage during the period of the pandemic which is still continueing. Official statistics show that the circulation of currency notes in 2018 was Rs 18.03 lakh crore. In 2019 that went up to Rss 21.01 lakh crore.
According to the Reserve Bank of India (RBI), there is still a good amount of cash in circulation in the country. The number of currency notes in circulation increased by 7.2% and the value of cash by 16.8% during Financial Year (FY) 2020-2021 as compared to 6.6% and 14.7% respectively during FY 2019-20.
Following the outbreak of the pandemic, the RBI is also making every effort to go cashless. But perhaps we are forgetting that there is still a good number of people and elderly population in the country who are either uneducated or digitally illiterates. They do not know how to use smart phones and computers. There are many who still do not go to the ATM, but prefer withdrawing cash over the counter,and buy and sell with the cash. There are many who do not use debit/credit cards, for the fear of losing money in online frauds.
Every day stories of cybercrime and other forgery keep appearing on newspapers and TV channels. Some people also believe that the dependence on smart phones will increase due to the cashless economy. Then there is always the possibility of the phone getting stolen. Moreover, there the infrastructure to address their concern too is inadequate at the moment. There is still a problem of electricity and internet connectivity in many parts of the country. There is also a problem with the availability of the credit card / debit card.
Obviously technology has its limits and this explains why only 20 per cent of the population could so far switched over to digital transactions.
If we look at the use of cash internationally, it is found that cash is still dominantly in circulation in many countries. A research in England revealed that most transactions are still happening in cash even during the pandemic period. In the counties in the north of England, 69 percent of people depend on cash, while in the south 46 percent of people depend on cash. Cash is widely used in countries of the Middle East, North Africa and Pakistan. In the Netherlands two thirds of the population still use cash. Japan, which was rapidly moving towards cashless a few years back, now has become the world leader in cash transactions. Four out of every five purchases are being made with cash. The biggest reason for this is due to good number of Senior citizens who want to use cash due to their physical condition.
The second reason is that there is no such thing as theft, snatching in Japan. In contrast, in the US, young people under the age of 25 use cash more because they transact in cash for small purchases. However, cashless economy is being promoted there too.
Still there are a few success stories of digital economy tranformation too. Cashless economy in the world is rapidly growing in Denmark, Sweden, Norway and China. Sweden is expected to become a complete cashless economy by March 2023.
It can be assumed that, of course, the coming time may be of cashless economy, but at present the reign of cash remains intact.
