KITE/NCISRDC/IJARIIT/2018/MBA/104 IJARIIT( ISSN: 2454-132X)

INDIA’S DRIVE FOR A CASHLESS ECONOMY-

1
HOD - Management Dept , Vivekanand Mahavidhyalaya , Raipur
2
HOD - Management Dept , KITE , Raipur
3
HOD - Commerce Dept. ,Vipra College , Raipur

ABSTRACT

When the Indian government recently banned two high-value currency notes, it led to all sorts of chaos. It led to huge
queues to exchange money at banks and ATMs , and this in a country where more than half of its citizens do not have
a bank account. According to a 2014 study by Tufts University, The Cost of Cash in India, cash operations cost the
Reserve Bank of India (RBI) and commercial banks about Rs21,000 crore annually. Also, a shift away from cash will
make it more difficult for tax evaders to hide their income, a substantial benefit in a country that is fiscally
constrained. Due to limited banking and credit card penetration India continues to be a cash-based society. At least
two places in India have already gone completely cashless. Long before Modi began his monetary purge, Auroville a
European-influenced, intentionally developed “hippie” town in Tamil Nadu and the 1,200 person village of Akodara
in Gujarat have already eradicated cash in exchange for electronic payment systems.But as the dust continues to
settle, a tangible long-term benefit of the process appears to be emerging: moving India towards a digital economy in
which electronic transactions play a major role in the financial system. The rush to do this, however, is likely to cause
a spike in cybercrime.
Purpose: The principal purpose of the work is to understand and define the concept of cashless economy. It also
examines the areas where the concept of Cashless Economy finds its application.
Methodology: The paper is written based on Digital transaction concept . The paper begins with discussion of concept
of cash based society. It then discusses the rationale of Cashless Economy subsequently discussing the Cashless
transactions merits and challenges.
Practical Implication: This work would help the Economy to understand the importance of Digital Business
environment.
Paper Type: Conceptual Paper
Keywords- Currency notes, Digital economy, Cash-based society, Commercial banks.

1. Introduction

India economy was an incredibly cash-centric. 95% of all transactions moving through accounted for cash , 90% of
vendors didn’t have card readers or the means of accepting electronic payments, 85% of workers were paid in cash, and
almost 50% of the population didn’t even have bank accounts. The Cost of Cash In India, cash operations cost the
Reserve Bank of India (RBI) and commercial banks about Rs21,000 crore annually. Also, a shift away from cash will
make it more difficult for tax evaders to hide their income, a substantial benefit in a country that is fiscally constrained.
This article explores the cashless economy concept, highlights different issues, challenges including regulatory and
security concerns. It attempts to identify the various aspects involved in the move towards cashless economy for India
along with a special focus on significance of such a move in small developing economies. Digital India is the flagship

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programme of the Government of India. It was launched on 1st July 2015 by Prime Minister Narendra Modi, with a
vision to transform India into a digitally empowered society and knowledge economy. “Faceless, Paperless, Cashless” is
one of the professed roles of Digital India. Major progress towards this goal was made in late 2016, when the
government took steps to demonetize the country.

1.1 Objectives Of The Study

The main objective of the study is to understand and define the concept of cashless economy. It also examines the areas
where the concept of Cashless Economy finds its merit,demerits and challenges.

1.2 Methodology

The paper attempts to bring forth the conceptual perspective of the Cashless Economy to enable researchers and
practitioners understand the concept in its totality . This paper is based on Secondary Data’s. It discusses the rationale of
Cashless Economy subsequently discussing the Cashless transactions and its merits, demerits and challenges.

Cashless Economy- As Prasad said that a cashles economy is an economy which is tracked in real time. “Each
transaction is mapped. Every taxman likes numbers. It will certainly help expand the tax net.”

1.3 Merits

Some of the merits of a cashless economy are listed below, going through these you will realise how significant this
initiative is and how it will shape the Indian economy in a positive way.
1. It boost the economy because the cost of making and handling paper money is quite high.
2. It reduces the terrorist activities, as most of the terrorist activities are fueled by the black money in hard cash.
3. This aids the environment, as no trees are cut for printing of paper money.
4. Reduction in crime rates. Crimes with financial motives are rare in cashless economy. An instance of this has
been seen in Delhi recently when the government pulled out high value notes.
5. It is the medicine for fake money problem. No cash simply means no fake cash.
6. Adherence to labour laws can be achieved, as now labours will be paid in their bank accounts.

1.4 Demerits

Every initiative has a lop side also, some of the demerits of cashless economy with respective to India are given
below. In the later part of this article we will talk in detail about the challenges related to cyber security, individual’s
financial data, and online banking fraud which a cashless economy can face.
1. No cash in hand. Always a dependency on your card or bank system connectivity.
2. Major part of Indian population is not educated about banking systems, specifically about the digital aspect
of it. Hence they may resist to make online transactions.
3. Automation and online transactions will cut down large number of jobs.
4. India is dominated by small retailers and they don’t have enough resources to invest in electronic payments.
5. Increase in cyber crimes and online banking frauds.
At least two places (Auroville Tamilnaidu and Akodara, Gujrat) in India have already gone completely
cashless before started this journey toward digital business transformation.

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1.5 Government Efforts

Furthermore, the Government of India’s additional initiatives like Mobile Seva and reward schemes like Lucky
Grahak Yojana and Digi Dhan Vyapar Yojana are supplementing the use of mobile in a cashless economy. Mobile
Seva provides a fully operational mobile payment gateway, incorporating various channels for making electronic
payments through mobile devices. Government departments and agencies can integrate the gateway with their
applications, so that citizens and businesses can make payments for various government services through their
mobile devices.
Launched in late 2016, Lucky Grahak Yojana distributes daily and weekly rewards to thousands of retail consumers.
Similarly, Digi Dhan Vyapar Yojana distributes weekly rewards to thousands of small businesses. To qualify for
these rewards, applicants must make digital payments through a Unified Payment Interface (UPI), RuPay, the
Aadhaar Enabled Payment System (AEPS), or an Unstructured Supplementary Service Data (USSD). These
initiatives have boosted confidence in digital mediums for payment services and will likely lead to increased private
sector mobile payment services, as well.

1.6 Challenges

The government’s move of demonetization has led to a push towards digital transactions. But the government faces a
slew of challenges to mark a shift towards a cashless digital economy.Challenges Government and Institution face in
making India shift toward cashless transactions:

a) Behavioural change: Adapting cashless transaction from age old conventional methods will take time to become a
habit.
b) Psychological change: Cashless transaction involves people’s scepticism and fear of loosing money and whom to
approach in case of failed transaction .
c) Class divide : This have widen the gap between banked and unbanked population .This divide will encourage one
class while other will take this as a business of other class.
d) Divide in internet and mobile reach: Lack of infrastructure and mobile telephony to rural area are barriers.
e) Illiteracy : it’s a biggest barrier toward illiterate people to first understand this change.

2. References

[1]. Hunt, R.M. (2013). An Introduction to the Economics of Payment Card Networks. Review of Network
Economics. Vol. 2, Issue 2, 80-96. URL:http://web.cenet.org.cn/ upfile/ 31290.pdf
[2]. Babalola, R. (2008). E-payment: Towards a Cashless Economy. A keynote address of the Finance
Minister of State at Card Expo Africa Conference. URL: http://www.nigeriavillagesquare.com
[3]. Daniel, D., et al. (2006). A Move toward a Cashless Society: A Closer Look at Payment Instrument
Economics. Review of Network Economics 5(2): 175-198.
[4]. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2876603
[5]. https://www.globallogic.com/gl_news/cashless-india
[6]. http://www. drshakyacurrentaffairs.com/cashless-transaction-challenges
[7]. http://www.inrevisacheckmastermoneyantitrustlitigation.com/history.php3

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[8]. http://www.businessweek.com/news/2010-05-19/credit-card-fees-may-be-next-as-lobby- smells-blood-

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