Pros and Cons of Cashless Economy in India

Everyone is facing huge problem when it comes to shortage of Rs 500 and Rs 1000 notes.

Why do we have to face this problem?

Is it by default or by design? Is our government doing the right thing?

Is cashless economy going to benefit this country? Or it is just for rich and poor have to suffer.

We debate all this and many other things in following article.

What is a Cashless Economy?

In a cashless economy most of the transaction will be done by digital means like e banking, debit and credit cards, PoS (point of sales) machines, digital wallets etc.

Cashless Economy

In simpler words no liquid money or paper currency will be used by the people in a given country.

In a cashless economy the third party will be in possession of your money.

He will allow you to transact that money whenever it is needed. If it is not needed then the third party can use that money.

Third party can be a government or any other public or private sector bank.

Why this Debate Now?

It is almost a month since Modi government banned Rs 500 and Rs 1000 note.

In the beginning people thought that this is a great idea and the country will become corruption free. But as the time passes people are getting weary about the ban.

Huge problems and pain that they have to go through each day, do they worth it?

Is the cashless economy the way forward? Both sides, people who favor cashless economy and people who don’t are putting their arguments forward.

So this is the right time for the country to have a debate whether cashless economy is good or bad for the country.

Pros of a Cashless Economy

Let us start with advantages of cashless economy.

Positive Impact on Society

We are seeing the impact of cashless economy on the society when it comes to crime rates.

According to Union defense minister after demonetization the crime rates in Mumbai has dropped to half.

Not just Mumbai but Delhi is seeing a substantial decline in crimes related to financial motive.

Bank robbery, burglary, extortion etc are declining because of demonetization.

Attack on Parallel Economy

This is one of the most important reasons why a cashless society is must.

People who hoard money under their bed (also known as black money), people who launder money bypassing banking channels, terrorist who need money to finance their terror etc will run out of business now.

Size of Parallel economy will reduce substantially.

Financial Inclusion

Digital economy will help to enhance our current banking system. There will be increased access to credit for people who did not fall in any banking network.

Financial inclusion will automatically reduce poverty.

Increase the Tax Net

All the transactions that are done can be monitored and traced back to a given individual.

If officials from tax department smell something fishy then they can trace the money transaction back to the individual.

Hence it will be really difficult for someone to evade tax. Increasing tax net is very important for any government.

Boost in Consumption

There would be no incentive for people keeping money in the bank. So they would love to spend on things that they like.

It will help to boost consumption that is really good for any economy. More jobs will be created and income level of people will rise.

Security and Convenience

Last but not the least is security and convenience. You don’t have to carry a wallet with money in it.

You just use your mobile phone or credit card for transaction. It is very hassle free and already going on in urban areas of the country.

Cons of a Cashless Economy

Well we also have to look other side of the picture.

Security – Cyber Attack, Fraud and Power Outages

Cashless economy can be a nightmare when it comes to security. All your transactions will be done digitally.

You will be prone to cyber attacks like hacking. Hackers can hack your sensitive information like password, credit card number etc and leave your account with no money.

Even your personal computer is compromised. You can save yourself from fraud but it is very difficult to save from a cyber attack.

Finally if there is a power outage especially in India which is very regular then entire system will be affected for long time.

Have to Trust Government or Third party

As I said earlier there is no money in your hand. All the money is digital so either they are in control of banks or government or any other third party.

You have to trust government or bank blindly because everything is under their possession. This is could be scary because if tomorrow something happens you will be left with no hard cash.

Reduced Liquidity means Bad for Certain Sectors

There are certain sectors which depend upon high level of transaction.

Sectors like Real Estate, jewelry, retail industry, restaurants and eating joints, cement and other SME will be affected badly because of cashless society.

It means a lot people who are employed by these sectors are also going to be affected.

Really Bad for Poor

This is the real point and will be debating this in great details in following paragraph. Here I just want to say cashless economy is really going to hurt poor.

Rich Vs Poor Debate

The whole debate about cashless economy revolves around rich versus poor.

Here we are not talking about Sweden or Denmark but India.

Still people in this country struggle to meet their basic needs like food, cloth and shelter.

Over half of the population does not fall in any banking network. They still have to depend upon hard cash for meeting their basic needs.

Recently over 80 people have died because of demonetization. You can imagine the impact if country decides to go completely cashless.

Poor people have to suffer a lot because they will not be covered.

On the other hand people living in urban areas will benefit because the cashless economy is for them.

Government has to be inclusive and include all sections of society before they go for a cashless economy.

Otherwise poor which is more than 50% of the country will reject cashless economy and government has to suffer set back in coming elections.

So you can conclude by saying cashless economy is good if it is inclusive otherwise it is really bad.

How Far are We From Becoming a Cashless Society?: A Ground Reality

Before we dream of becoming a cashless economy we have to face many realities. Here are some of them.

1. Half of the Population Does not Fall in Any Banking System

As I said earlier 50% of Indians are not covered by any banking system so how you can think of cashless economy.

2. Limit Internet Penetration

In India there are over 350 million internet users. The internet penetration rate is just 27% which is very low compared to countries like Nigeria, Kenya, and Indonesia etc.

It has to be at least 67% which is global median.

3. Limited Smartphone Penetration

Only 17% of Indians use smartphones which is very low if you want to become a cashless economy.

4. Limited Smartphone with Broadband Subscription

Only 15% of Indians have internet on their smartphone. So it will be only 154 million people with broadband on their smartphones.

5. Internet Speed

The internet loading speed is very slow. The average page load time in India is 5.5 seconds whereas in China is just 2.6 seconds.

6. Limited PoS Machines

PoS machines (Point of sales) are must for any cashless transactions. However in India there are only 1.46 million PoS machines. It means only 856 machines per million people which is very low compared to China where it is 4000 machines per million people.

After reading above 6 points you will conclude India lacks infrastructure for a cashless economy. So it is going to be long time when India thinks of becoming a cashless economy.

Where Government and Society Stands on Cashless Economy?

Government is taking measures to increase liquidity into the system so that people face less inconvenience.

Recently RBI launched Unified Payments Interface which makes digital transaction very simple.

Government is also trying to improve overall infrastructure so that more and more people can come into banking net and internet.

Society has also to play its part. They have to understand the importance of cashless economy and appreciate measures taken by the government.

156 COMMENTS

  1. The idea is really great but it is useful only for the educated people but not to the uneducated one it takes lot more still many generations in India to implement, we people who are reading this will support cashless economy just because we understand this concept and we will be benefited by this but when we go and ask the same thing in villages around us then we come to know how those people manage without hard cash.

  2. What happens when the internet and communication system is down for few days or weeks. How do people buy water?

  3. It’s just excellent to have cashless economy but I too support that it has cons too. It’s not at all beneficial for the poor of the country . It has both pros and cons which should not be neglected.

  4. In my opinion it would be nice if both cash and cashless economy goes together because there are still millions of uneducated poor peoples in Our country India (BHARAT).it will be an Inconvinence for them if cashless economy goes alone. I think that won’t make it. Thank you.

  5. In my opinion cashless economy will creat lots of problem and difficulty because our country India is a developing country that there are still millions of uneducated and poor people who doesn’t even know how to use a keyped phone. So it would be good if both cash and cashless go equally.

  6. I have always been against a cashless society. Look at the United States. The Housing disaster that left millions homeless and now mortgage rates are so high it’s almost impossible for families to buy homes. Apartments cost more than what house payments use to be. Now in my city we have a place where the homeless gather called the tent city. Until city hall made an ordinance to kick them out in a month or they will use brute force. Their only crime is being poor and not having money to buy a home. There aren’t enough jobs. The cash the get from people who are generous enough to help them would go away in a moneyless society. My husband and I don’t use credit cards, checks, we keep very little money in the bank. We pay bills in cash and keep all reciepts. We have done well with this system for many years. Hackers have become too good. I look back at the savings and loans crisis and it scares me to put so much faith in government and banks that are vulnerable to people that don’t care for the poor and starving, or even the small businesses. So please take a hard look at what your doing to your country as a whole. A country of beauty and culture that deserves respect and dignity.

  7. Cashless India is great if it will sucess

    And we all know that for doing a great work we have to face some
    Problems

    But it has both pros and cons

  8. cashless economy will definately be good for indian economy and its people india will move gradually towards it.Initially every major change is opposed but every good change should be done in the interrest of country as a whole.when computer were brought to india, it was opposed a lot.but today we are benefitted because of computarisation.in conclusion i am of the view it is a good and historical step taken by PM Modiji.and it is only who can take such bold steps,i admire him.

  9. LET US CO-OPERATE OUR GOVT. THINGS WHICH HAVE NOT HAPPENED IN 50-60 YEARS
    LET THEM HAPPEN. WHEN WE WHAT FACILITIES LIKE USA ENGLAND AND OTHER DEVELOPED COUNTRIES , WE WILL HAVE DO WHAT THE GOVT SAYS.

  10. I think cashless transition is very good idea of our prime minister but timing of applying that is not right and arrengnment of notes in place of 500 and 1000 is not done ………
    they simply apply the formula not even one time think about effect of its one other people and society……..now basic idea of cashless is very nice but some basic mistake create a big problem for us …like transition problem,time waste in line of ATM an and bank and many problems .

  11. I live in a village. Population is around 10000. Out of which 80% peoples are poor. There daily earning is 50-60 rs only. Which is not sufficient to maintain a 4-5 members family. They can only dream to buy a mobile (button mobile not Smart phone). So tell me what is going to happen with their life in cashless economy.

  12. this is the great step take by modi ji and i support always this type of the activities. but now create problum by bank employees and do hopeless aam janta .so now need take astick step againsed currept people.

  13. cashless economy is the great thins but it very painfull at its starting stage and we have took mejor step so that we do not look behing it may happense that we may groth very raptdily and become historic country

  14. instead of cash less let us coin is less cash and i am in favour of less cash society .
    I agree that there are problems and difficulties , but let us take the example of Jana Dhan Yojana. When it started there were similar criticisms, but it is a success story now.
    we Indians generally see the negative sides more , we believe in criticizing, we believe in finding faults.
    We know the benifits of less cash society. So we should spend our energy on how to make the change over more smooth. If we have some thing good to suggest , let us suggest the govt and and co operate with the govt for a smooth and quick change over.,

  15. Are there any charges from the bank as per transaction?if so what about the poor,you will find that for example someone has been offered small amount of money for that individual to be charged i think its kind of inconvenience to him/her unlike given hard cash which is like kind of exact amount. In addition to this, with this digital thing,uneducated and elderly,handicapped e.t.c all those people who are less privileged how are they gonna withdraw their money,is there any training for them or any kind of assistance from the government because if not so,this can lead to high family conflicts and fraud as children or relatives will be the ones responsible to assist the uneducated elders or the handicapped, so for me i think cashless economy is bad for the country,thanks.

  16. No Doubt Eliminating Black Money is a great thing. But even thinking of a cashless economy is stupid
    Well its not if you dont give a damn that if 50 % of the Indians starve even for a day due to this great idea
    Well its not if you dont give a damn that if 50 % of the Senior Citizens starve even for a day just because they are too old to catch up on tech.
    It would be great if all these issues can be taken care of and then introduced .
    By the way is there any country that has even tried this out???

  17. Cashless transactions is indeed now in our country to remove corruption.. PM Modi’s decision is good for all over public.. it’s good effect will be seen after few times..

  18. it’s a best and easiest way in money transaction, because in many places we need changes for money transaction especially like for bus tickets, from shops etc. When this this will come in act we can reduce the problems due to lack of changes and not only this their is no need to take the in our pocket and their by reduce the effects of theft, missing all those thing. So I this this is a best method.

  19. According to me its a good stand but not for all.. for todays generation its not easy for people to carry their credit cards all over, specially for the students.Its difficult to carry credit cards for these students for their safety. and when it comes to mobile phones, there are many people who cant effort smartphones or don’t know to operate it. incase of low battery if person has no charge in his/her mobile and has no option to pay, how will he/her pay the money at that present situation? talking about girls how it is possible for a girl to carry credit card at night time as robbery and rape cases are more in day to day life. and if by chance robbers don’t get money will the person has to loose his/her life? nowadays poor people are suffering a lot because they don’t have a credit card nor a smartphone. modi gi is going a good job but not the rich and the middle class are suffering but the poor. first he should see that the people who sleep on roads footpaths gets food to eat and house to sleep ( mahada ) then the changes would be more good and easier.. some people are caught for their black money but many poor are dying standing outside the banks and and by no money to eat. thank you

  20. Cashless society is very important for our nation,but firstly government has to think about poor people.

  21. I welcome cashless Economy because of the following advantages
    1. No printing expenses to the Govt.
    2. No reprinting expenses for the wear and tear Notes
    3. No more money printing department
    4. No Black Money
    5. No scam
    6. No worry about cash changes
    7. No worry about fake notes
    8. No arguments like.. Sir I have given Rs.100 to you no you have given Only Rs.50 etc
    9. No more beggars because they will get only food nothing else, since they get only food they will stop begging and go for work
    10. No more rowdyism for money,
    11. No more fake donations
    12. No more fake collection
    13. No one can threaten you for money since they will be catched red handed and blocked their account
    14. No killings for money
    15. No need to carry money
    16. no need to stand in queue for making bill payments

    in cashless economy govt has to Protect the Individual data from cyber crimes, Protect Individual Traveller who lost their debit/credit cards

    databolish swipe charges, and other taxes related to this cashless economy

  22. Cashless economy is very good for stress free life. There is some negative facts in India. State & Central Govt. as well as countrymen of all rural and urban areas will have to change their thinking towards cashless economy positively and take action towards this safe & stress free life. They will have to change their daily habits.
    For this great opportunity, they will have to take personal initiatives for banking & cashless transactions. It will take time to change their lives as per their interest & initiatives in the matter.

  23. how far it is correct to trouble lot many poor, lower middle, sr citizen, rural dwellers etc for inefficiency of the Govt to eradicate black money . it is like somewhere in the house there are cockroaches and to kill them burn your house. on the day of announcement ie 8th nov there was no talk of cashless society and as the days go by there is a shift from black money slogan to digital wallet etc after realizing that the purpose had little success. Terrorists are robbing the banks and take care of their terrorist activities. Govt should have first prepared infrastructure for digital wallet , cashless money before venturing for demonetization of currency. there is total failure in the scheme.

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