Waning dream of cashless

The authors and the protagonists of cashless economy seem to be seeing the reality. Wisdom unavoidably dawns on those wandering in the world of fantasy.

Irrespective of merits and demerits of cashless economy, the question today is whether or not it is a distant reality.

The leaders of government both at the Centre and in the State in an honourable retreat started making statements to the effect that they intend only a less cash economy but not cashless.

The international experience even suggests that cash is still the king of the global monetary transactions.

Like the hurried demonetisation, any hasty attempt towards cashless economy would prove to be detrimental to the interests of the common man in a context where adequate infrastructure and safety systems are yet to be built.

Cash is still alive and kicking in advanced economies even as India dreams of going cashless. The value of dollars and Euros in circulation has doubled since 2005 to $1.48 trillion and €1.1 trillion respectively, indicating the preference for cash as payments instrument even in the affluent economies.

How is it possible to kill the cash in India where cash-intensive sectors dominate the economic activity?

A Bloomberg report states that the new research on payment choices in Australia, Austria, Canada, France, Germany, Netherlands and the United States shows notable differences among these countries.

But, consumers in all these countries use cash more often than any other payment method.
The experience worldwide indicates that cash is preferred especially for smaller transactions.

Expensive transactions form only a smaller part of India’s monetary system given the levels of purchasing power in the hands of average Indian. Thus, the character of Indian economy can only encourage less cash scenario rather than a cashless one.

There seems to be an eminent demographic divide in embracing cashless economy. More precisely, the research clearly indicates that low income consumers are far more likely to use cash than high income people. A public policy in a welfare State should always be conscious of those in the lower ranks in the economic ladder.

The cash crunch is forcing people to take up cashless lifestyle. But, as the currency swap completes, people may still prefer cash transactions. This is because government is pushing two contradictory policies together – demonetisation and cashless economy.

Normally, demonetisation should lead to cashless economy. But, in the present paradigm, the government has not really resorted to elimination of higher denomination cash. The introduction of new Rs 500 notes and introduction of much higher denomination Rs 2,000 notes makes demonetisation devoid of any commitment to cashless economy.

Instead of such an ill-planned move, the government should implement policies that encourage cashless lifestyle.

Cash transactions account for just 3 per cent in Sweden. Even street food and newspapers can be purchased in Norway through mobile banking. Almost one-third of Denmark population use cashless mode of payments. Over 90 per cent of the population opts for cashless transactions in Belgium.

Reports even suggest that liquid cash is diminishing in poor African countries like Somalia and Kenya.
Countries like Germany, Austria, etc., go the opposite way. India should carefully study these contrasting experiences before rushing to cashless economy.