PM Narendra Modi’s goal of a cashless India may be thwarted as digital drops

By: | Published: March 10, 2017 4:27 AM

Digital transactions are dropping before next week’s deadline to lift all lingering caps on cash withdrawals, central bank data show.

Modi had shocked the nation Nov. 8 when he canceled 86 percent of currency in circulation and pushed for electronic payments to boost transparency and fight graft. (Reuters)

Prime Minister Narendra Modi’s plan to reduce country’s reliance on cash may go awry. Digital transactions are dropping before next week’s deadline to lift all lingering caps on cash withdrawals, central bank data show. Modi had shocked the nation Nov. 8 when he canceled 86 percent of currency in circulation and pushed for electronic payments to boost transparency and fight graft.

Printing presses are churning out new bank notes and come Monday, Indians will be able to withdraw as much money as they like from their bank accounts as the Reserve Bank of India lifts the 50,000 rupee ($748) a week limit. Economists including Sonal Varma at Nomura Holdings Inc. predict India will recover from Modi’s cash shock by June and demand will rebound after that.

The $2 trillion economy is forecast to grow 7.1 percent in the year through March, the slowest pace since 2014 but among the fastest in the world. As much as 98 percent of all consumer payments were in cash, according to a PWC report in 2015.

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Also, the government’s clampdown on cash lost the economy a few billionaires last year though the richest hardly saw their fortunes hit.

India dropped one spot to No. 4 on the Hurun Global Rich List as the nation lost 11 billionaires in 2016 while the world added 69. However, the 18 Indians among the top 500 billionaires saw their wealth drop just 1.5 percent, according to the Bloomberg Billionaires Index.

“The world today has 5,000 dollar billionaires, assuming that for every one we have found we have missed at least one,” Rupert Hoogewerf, chairman and chief researcher at Shanghai-based Hurun Report Inc. said in a statement. Changes in the list were triggered by a strong U.S. dollar together with gains in major stock markets, Brexit, Donald Trump’s election as U.S. president, a surge in property values in China and demonetization in India, he said.

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