Demonetisation of old Rs 500 and Rs 1000 currency notes has come as an opportunity to fast-track India towards a digital, cashless economy. But a political debate has started over the pros and cons of digital transactions economy. It is ironic that no opposition leader has talked about the benefits of digital, cashless transactions.
However, Kiran Mazumdar-Shaw, CMD of Biocon Limited, “firmly” believes that “digital payments economy is an idea whose time has come.” In an article published on Linkedin, she has argued how digital payments is the logical step in the evolution of money exchange.
Shaw writes, “History shows us how money as a ‘medium of exchange’ has evolved over several millennia from cowry shells to gold and silver coins to paper currency and now to electronic data.”
She quotes what Prof Yuval Noah Harari has written in his bestseller, ‘Sapiens: A Brief History of Humankind’: “As long as people are willing to trade goods and services in exchange for electronic data, it’s even better than shiny coins and crisp banknotes—lighter, less bulky, and easier to keep track of.”
Shaw says that note ban has offered a “transformational opportunity” to take the country’s cash-intensive economy to an “inclusive, less-cash dependant, digital future.”
Quoting a July 2016 report by Google and the Boston Consulting Group (BCG), Shaw says digital payments have increased rapidly in the country in the last decade. While in 2005, 92% of transactions in the country were carried in cash, in 2010 it stood at 89% and at 78% last year. This percentage is expected to drastically reduce in the coming months after demonetisation.
Shaw also argues that digital payments will not only improve financial inclusion but also reduce poverty. A recent study published in the journal ‘Science’, has provided “empirical proof” as to how “mobile-money services” can help reduce poverty in developing countries. The study found that per capita consumption levels increased and over 194,000 households were lifted out of poverty when mobile money system M-PESA was introduced in Keyna. Shaw says “India can emulate Kenya by building a strong digital payments economy.”
Secondly, digital transactions would also improve people’s creditworthiness and allow them to access cheaper loans. Shaw concludes: “With all the pieces in place, demonetisation provides India a unique opportunity to leapfrog into a brave new digital world!”