Prime Minister Narendra Modi’s demonetisation move is being seen as a step towards making India a digital cash-less economy. The government is now even planning to introduce ‘sarkari’ e-wallet and provide subsidised smartphones to people in villages to leapfrog India into the future.
The demonetisation has caused temporary inconvenience to crores of people in the country. It is highly unlikely that the flow of cash in the ATMs and Banks would be same as earlier again. The government wants people, especially those living in urban areas, to do cashless transactions with the help of cheques, credit/debit cards, internet banking and mobile e-wallets. The government’s vision is supported by sound economics logic.
Here are five reasons for which the government is encouraging cashless transactions in the country.
First, the government has to spend around Rs 21,000 crore every year for managing currency operation in the country, according to a report by Mastercard.
Second, the cost of printing currency notes is very high. A report says that the RBI spent around Rs 3,421 crore for supplying currency notes in the country.
Third, the estimated cost of producing new Rs 500 and Rs 2000 currency notes would be around Rs 15,000 crore.
Fourth, the cash-GDP ratio in India is at 12%. Ideally, it should be very less. In most of the developing countries, cash-GDP ratio is around 5%
Fifth, the cashless transactions are eco-friendly. It will make it easy for the government to monitor the flow of illegal money.
To promote cashless transactions, the Union finance, telecom and information & technology ministries are jointly preparing the plan to introduce the ‘sarkari’ e-wallet. The NITI Aayog will handle the responsibility of monitoring the project.
The government will also take measures to make it viable for people to make payments via e-wallets at petrol pumps, educational institutions, ration stores, milk parlours, railway stations, bus stops etc.