“A cashless economy is not a dream. It’s a direction — and we’re already on the path.” — PM Narendra Modi
As said by our honourable Prime Minister at various occasions, this statement rightly captures the essence of the transition undergoing in the Indian economy, from cash to clicks. Getting a greater push from the technological revolution, coupled with the government policies and increasing digital awareness, the Indian economy is gearing up, rather already on the path of becoming a cashless economy. The vision is to make India a completely digital cashless economy and develop an efficient and inclusive financial system.
A ’Cashless Economy’ refers to an economic system where transactions are carried out using digital methods, with almost no physical contact. It has immense benefits attached with it, including financial inclusion, curbing black money, and developing a transparent economy, along with bringing a modern technological innovation.
The digital payments trend has witnessed a surge since 2016, the year of demonetization. With the advent of COVID-19 pandemic, a further acceleration was provided to the digital payments interface, as physical contact was restricted and people started depending more on cashless systems. Platforms like Unified Payments Interface (UPI), QR-Codes based payment system, mobile e-wallets, and internet banking have altogether brought a revolution in this digital currency ecosystem.
THE CASHLESS INDIA VISION
When the Digital India initiative was launched in 2015, its main aim was to transform India from a traditional economy to a digital one. Changing the way financial transactions were carried out was one important approach to do this. Hence came the idea of developing a cashless India, which promised an efficient and more convenient way for the public to handle their finances, along with digitizing the economy. Not only for the public, but the benefits also reached the government by better monitoring the economy and identify tax evasions, black market and corruption hotspots.
As the circulation of paper currency reduced, the cost of printing them reduced. Along with that, the transportation and storage costs also drastically reduced, saving considerable amounts of public resources. It also resulted in the empowerment of the citizens, as the digitalization of their finances provided them easy access to money and reduced dependence on keeping currency notes. More and more people started depending more on digital currency than cash, giving a greater push to the development of a cashless economy. Bank accounts were opened at a large scale, with a good support provided by the government for the same. This digitalization reached even the remotest of the areas of our country, spreading the empowerment and awareness, and promoting financial inclusion of all.
Nobody knew that a devastating pandemic would strike the world and cause huge losses in every sphere. The COVID-19 pandemic severely impacted the world economy. The Indian economy also suffered, but with the existence of digital economy in place, the circulation of money did not stop, and the need for contactless transactions accelerated the growth of digital payments. As a result, people completely started relying on this cashless and contactless system during that phase and beyond.
THE VIABILITY OF THIS MODERN SYSTEM
With a huge population, India has the capability of developing a vibrant, technologically dominated financial ecosystem. With over 1.2 billion mobile phone connections and drastically growing internet penetration, this digital payments system has become highly accessible all over the country, and people of all ages now have the knowledge and awareness, and participate in these digitized transactions.
The government is also actively promoting the usage of digital payments through public awareness campaigns and various schemes and incentives. A greater push is provided to open bank accounts, and with the introduction of Pradhan Mantri Jan Dhan Yojana (PMJDY), the government allowed zero balance accounts to be opened by the people. It resulted to be the biggest financial inclusion scheme of the world, with the public gaining greater access to banking and digital services, even in rural, underserved, and remote areas, where internet connectivity is unthinkable.
Additionally, the convenience of this system is unmatched. It has reduced the time and efforts of the people, with increased efficiency. Now, transactions can be done sitting at the comforts of one’s own home, without any hassle. This is beneficial for businesses, especially small and local ones, as they can digitize their work and also promote and spread, and expand their business. The process of accounting and record keeping has also become more streamlined and efficient, easing the work of the people, along with their lives.
THE CHALLENGES INVOLVED
Even though the benefits are unparalleled, there are still various challenges hovering around, inhibiting the complete transition to cashless economy. As mentioned earlier, the penetration of the system is far and wide, but the problem of digital divide between urban and rural areas still persists. As per a recent survey, around 30% of rural population still has inadequate smartphones and internet connections as compared to urban areas. The lack of proper infrastructure coupled with inadequate awareness and digital literacy adds on to this problem. Meanwhile, urban areas enjoy all the benefits served by the system.
There has been a dramatic rise in data theft, malware and phishing attacks, digital scams, and cyberthreats. According to The Standing Committee on Communications and Information Technology Report, “The number of cybercrime complaints rose from 9.7 lakh in 2022 to 11.5 lakh in 2023.”. These attacks majorly target digital platforms, resulting in severe losses to the citizens. This, coupled with lack of digital literacy, has resulted in fear being developed in the people, preventing them from further adopting this system.
Apart from that, the Indian economy is largely informal and still dependent on cash as the main mode of transaction. People like daily wage labourers use cash for their convenience, simplicity and immediacy, and resist making digital payments due to limited knowledge and lack of trust. Along with that, infrastructural limitations persist in the form of improper availability of electricity and unreliable internet connectivity. The fear of losing private data and government interference are some other factors inhibiting people to adopt and adapt to these changes.
A multipronged approach in the form of strong cybersecurity frameworks, enhanced awareness campaigns and programs to educate people, more support by the government, expansion of digital infrastructure and connectivity, policy reforms, and enhanced Public-Private-Partnerships (PPP), is needed to develop a fully digital economy and achieve the vision of developing a cashless India.
THE WAY FORWARD
It is not just about technology, neither it is just about modernization. Achieving the vision of cashless India is also about citizen empowerment. When people are empowered enough to make their transactions, big or small, with just a few taps on their digital devices, it makes their life simpler and free from managing money, removing the risks that come with it.
In a country with over a billion people, the journey of this transition is not easy. Addressing the pressing issues of digital divide, improper infrastructure, lack of awareness and many others is not easy and time taking as well. But the foundation has already been laid by a robust fintech ecosystem, platforms like UPI, progressive government schemes, and increasing digitalization. This gradual progress towards the main goal is altogether aspirational and revolutionary. Our nation is slowly moving towards a less cash and more digital economy. With continued efforts not only from the government, but from the citizens alike, no sooner can India set an example globally, of being a technologically empowered and financially inclusive economy. The journey to a cashless economy may be long, but the path is already visualized, carrying a promise of a brighter future for India with itself.
About Author - Shubhi Malhotra is a passionate scholar of Defence and Strategic Studies at DAV College, Kanpur. Having successfully qualified the UGC-NET, she now sets her sights on a Ph.D., driven by a vision to shape the discourse on Military Affairs and leave a lasting impact in the world of strategic thought and national security.