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India’s quest for a cashless economy

Prime Minister Narendra Modi, in his radio address Mann Ki Baat appealed to all citizens to be a part of less-cash society. Subsequently he launched the BHIM app and later the government is planning a live presentation on cashless transactions through UPI and BHIM App, during the Republic Day parade this year. Meanwhile, investors are trying to encash this cashless move by investing in the digital payment start-ups. And why shouldn’t they invest? It’s a win-win situation, when the transactions carried out by mobile wallets have increased from ₹82 billion in 2014-2015 to ₹490 billion in 2015-2016 and especially when the popular PM has become the brand ambassador of cashless economy. With Indian as well as foreign investors investing in Indian e-commerce industry, we will get a wide range of digital payment options and a big boost to domestic entrepreneurship. In fact, this is essential for the nation in its quest for cashless economy.  However, are these activities sufficient?

Naya Gaon is a medium size village located in Kekri of Ajmer district, Rajasthan and 309 families reside there. The village came into limelight when it was declared ‘cashless’ in December 2016. Within a month it has been transformed from ‘cashless’ to ‘only-cash’. All the 5 PoS machines allotted to the village are not functioning and internet connectivity is so poor that people are unable to use mobile apps for fund transfer. In a country where poverty line is set at ₹32 per day, no one can expect these villagers to do USSD transaction which charges ₹1.5 for checking the account balance.

Nearly 70% of the country’s population resides in rural areas. Despite this, 70 years after independence, incumbent government has to take initiative on providing basic amenities like electrification of villages, provision of LPG connections, prevention of female foeticide, etc. But today, this has made India to expect a lady from a newly electrified village to buy daily supplies using digital transaction and cook food using the LPG connection which she will see for the first time in her life.

We have not performed well on urbanization front. Even after India’s liberalization in 1991, from the entanglement of crony socialism, we Indians have been unable to build any well planned city, except Lavasa which is better known for its controversies. As a result, Indians living in small towns and villages have to migrate to some selected cities in search of better jobs.

Moreover, in order to understand even the easiest of digital transactions, people should be able to read more than just their names, which unfortunately is the benchmark for measuring literacy in India. How can the contemporary Indian society become ‘less-cash’ without the inclusion of 36% of our population which is illiterate? If somehow illiterate citizens manage to make digital payment on their own, they will be refrained from doing any further transactions via machines if mistakes are committed in their first payments either because of unawareness or inadequate information.

If India wants to transform itself in to a less-cash and then into a cashless society, its citizens need:

  1. Cheap but quality education
  2. Infrastructure in villages
  3. New planned cities.

If we could teach our family members, and other people how to go cashless, we can play a key role in our quest for cashless economy.  But additionally, if government could provide easily accessible, low cost and good quality education, an educated individual will not only understand the digital processes better but also perform the transactions with confidence. With better infrastructure in villages, villagers will be encouraged to trust the reliable network for digital payment and to learn the necessary processes voluntarily.

Development of well planned cities will help reduce the burden on the infrastructure of current cities, resulting in dispersed development and increased reliability. It’s evident after demonetization that most of the Indians are not afraid of facing issues, but its also true that an average Indian will be more than happy to get his/her issues resolved quickly, especially during some emergency. An educated Indian with adequate infrastructure and a wide range of digital payment options will be excited to go cashless.

(The views expressed by the author in the article are his/her own.)

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