Trilok Singh
What is cashless economy or virtual economy?
It can defined a situation in which flow of cash within economy is non-existent and transactions are done through electronic channels like debit card, credit card, electronic clearing, payments such as Immediate Payment Service (IMPS), National Electronic Funds Transfer and Real Time Gross Settlement in India.
Cashless economy can well be reality in India, but their are some barriers which can be reduced with help of Government initiatives.
- Government must create awareness about benefits of cashless transaction and increase participation of rural population in banking by effective implementation of Jan dhan Yojna.
- By putting in place robust payments mechanism to settle digital transactions which will help for safe transaction.
- Giving incentives such as a service tax waiver when credit cards or other forms of digital settlements are used will promote the use of cashless transaction.
- The Reserve Bank of India too will have to come to terms with a few issues, from figuring out what digital payments across borders means for its capital controls to how the new modes of payment affect key monetary variables such as the velocity of money.
- RBI will also have to shed some of its conservatism, part of which is because it has often seen itself as the protector of banking interests rather than overall financial development.
An investigative team of retired judges appointed by the government handed in the fifth of its reports recently.
Important recommendation made:
Cash transactions of over Rs.3 lakh be banned and Nobody should be permitted to hold more than Rs.15 lakh in cash.
Tax evasion has always been an issue in political arena. In a bid to evade tax many Indians deposit their money in offshore account. Cashless economy will have crack down on this black money. That’s why the government should focus more on enabling this transition than on draconian and hard-to-implement laws that threaten tax evaders with years of hard labour. The best way to eliminate black money is to get rid of the money.
The government has identified 19 short-term measures to be implemented in the current financial year in keeping with its plan to move to a cashless economy. The government is committed to digital transactions infrastructure and putting in place the ecosystem where facility for transactions can be availed at doorstep by common man.
Finance minister Arun Jaitley said that the government’s decision to withdraw Rs 500 and Rs 1,000 notes will move the country towards a cashless economy or virtual Economy. It will take India towards a cashless economy, it doesn’t merely push the country in that direction, but significantly pushes it. The government’s move on 08-11-2016 to demonetise Rs 500 and Rs 1,000 notes to check black money, counterfeit currency and terror financing will also encourage digital transactions.
Is India prepared for a cashless world?
If India hopes to be a cashless economy, it is not enough that everyone has a bank account (crores of people still do not have them); it is important that facilities exist to transform every transaction into a cashless transaction.
What number of shops have credit/debit card machines? What number of individuals have credit/debit cards? What number of individuals have knowledge about net-banking?
At this point when India is not prepared for a cashless world, the untimely presentation of measures for a cashless economy will only adversely affect the poor and working classes of society. We require progressive and better management of steps if we aspire to go cashless.
This is a measure to cover up the utter failure of the Modi government on the economic front, on joblessness, high prices and no pick-up in domestic demand, crippling all sections of our population, especially the working classes, and ruining the peasantry.
Digital money would need everyone to be digitally connected, and connectivity to be available in every nook and corner of the country 24x7x365, even in the face of natural disasters. That time will come, technology will make it possible, but there is still a long way to go.
How can cashless transactions help an economy?
Cash is a costly item as the paper is imported and movement of cash involves expenditure for security and insurance. If people do banking through cheques and net banking all these expenditures can be minimized. Cash transactions should therefore be minimized. However in India 100% financial inclusion has not been made. So people depend on cash transactions.
If all activities are routed through Banks, the problem of black money can also be eradicated to a great extent if not eliminated as govt will have access to all available banking information.
Of course there are cyber crimes but compared to black money such crimes are much less in dimension. Insurance companies have introduced cash less medi-claim facilities, which has eradicated a lot of bogus claims and simplified payment mechanism. Thus cash less transactions helps the economy to a great extent.
This surgical strike on 500 & 1000 note is one way to curb the hidden black money. This may not cleanse the entire black money exists in our country, but will definitely reduce to a significant level. Central Government took this bold decision (may be months back) and suddenly implemented it leading to chaotic situation among unaccounted money holders. While the regular people i see are happy about it and will be more than happy when we have a seamless cashless transactions at every POS in India.
Advantages & Disadvantages of a cashless society?
Advantages:
The main advantage of a cashless economy is that a record of all economic transactions through electronic means makes it almost impossible to sustain black market. Because it is also much more risky to conduct criminal transactions or avoid the proper payment of due taxes in a cashless society, such violations are likely to be greatly reduced. Reducing use of cash would also strangulate the grey economy, prevent money laundering and even increase tax compliance, which will ultimately benefit the customers at large.
Moreover,
Electronic payments will help businesspeople grow their customer base and resource pool, far beyond the limitations of their immediate geographic area.
- Using a payment card gives convenience and security than making cash withdrawal and moving to where to make purchase.
- It will drive the development and modernisation of the payment system, promote transparency and accountability, reduce transaction costs and decrease the size of the gray or informal economy.
- It will reduce pickpocketing and highway robbery which is very rampant in some countries.
- It will help users control reckless spending and improve personal accountability.
Disadvantages:
NO CASH/CURRENCY at hand. If you lose it may take a long while to procure another. Moreover, cash is not under your control, Impractical if you move to another country, Cards get expired and then you have to buy new one which takes long time, Without cash there would be no instant payments for goods and services, Disadvantages of a cashless society consist of privacy issues and computer hackers, Banks will be more powerful and there will be high interest rates.
The whole system relies on trust. If you don’t trust the government to accurately record your money then it can quickly vanish. When a crisis hits there is a surge of people wanting physical cash over deposits. People don’t like being told you can not take your money out.
Is India prepared for a cashless world?
If India hopes to be a cashless economy, it is not enough that everyone has a bank account (crores of people still do not have them); it is important that facilities exist to transform every transaction into a cashless transaction.
What number of shops have credit/debit card machines? What number of individuals have credit/debit cards? What number of individuals have knowledge about net-banking?
At this point when India is not prepared for a cashless world, the untimely presentation of measures for a cashless economy will only adversely affect the poor and working classes of society. We require progressive and better management of steps if we aspire to go cashless.
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