DMPQ: Is cashless economy feasible in India? Also discuss the impact of it on informal economy?

India Cash/GDP ratio is 12.24% which makes it one of the largest cash based economy. But there are certain problem for a cashless economy especially for India as :

  • ‘ There is low penetration of internet. Last mile connectivity especially in rural sector is quite low which creates hurdle in digitisation of economy.
  • Lack of financial inclusion due to low bank penetration is another issue. According to a report, 221 million accounts are in inactive state.
  • Another issue is of theft issue. Debit card fraud are increasing.
  • According to Transparency international report, India is placed at 76th rank out of 168 countries . Hence, corruption is a major problem.
  • Rural economy still runs on cash. Hence it is difficult to implement cashless measures.

Impact on informal economy:

  • It will push informal sector to go for digitisation like payment of wages. SO additional cost in the long run but might be beneficial in the long run.
  • It will 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z"/> Subscribe on YouTube
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  • Government with employees having account can provide bsocial security benefits like pension, health insurance etc.
  • It will help to increase the tax base. As informal sector will come under the vigilance of taxation authorities
  • In the short run it might lead to unemployment.
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