The Demonetisation Step
At 8 p.m. on the 8th of November, 2016, Prime Minister Narendra Modi, declared the demonetisation of the currency notes of Rs. 500 and Rs. 1000, rendering them invalid as legal tender, through a live-telecast. The Indian currency has been demonetised twice before in 1946 and 1978, however the recent announcement came as a shock to the Indian population. The government cited reasons such as curtailing the circulation of ‘black money’ and tax evasions in the economy. The populace was greatly inconvenienced due to the non-availability of cash, on the 8th of November; the transactions in those denominations of currency amounted to 14.2 lakh crores, around 86% of total cash transactions. The move was further led by non-ending queues outside banks and political discussions.
Reason behind the drastic move
The main reason that governs the strong move of Demonetisation taken by the Government is the pervasiveness of black money and tax evasion in the Indian Economy. The main goal was to bring into view the unaccounted income and attack malpractices like circulation of fake currency and dodgy funds, corruption, red-tapism, human trafficking, money laundering, terrorism etc. as such are primarily funded through high value currency.
Evaluating Cashless India: Schemes by Government to promote digital payments.
Cash is the life-blood of the Indian economy. Indeed demonetisation has painful been painful yet it has far reaching positive implications for the Indian economy. Several schemes have been launched by the Government for promoting the digital transactions for instance online platforms like BHIM, M-Pesa, RuPay, toll discounts etc for making the things much easier. Digitalisation serves as a backbone in tracing unaccounted income, illegal transactions as well as tax evasions.
Since then there has been search and raids by the Income Tax Department and estimates show that approx. Rs 3185 Crore of undisclosed income has been found while the no. is still on count.
Overall there are almost 22 schemes launched by Government which is a master stroke in Indian history.
Positive aspects: Why India should grow as a cashless economy.
Black money acts as a poison and weakens the roots of economic system of the country. A study conducted by Indian Statistical Institute ascertains that the amount of black money in India approx Rs 3 lakh crore while that of fake currency is Rs 400 crore. However, with the advent of digital transactions it would become easier to trace black money and other illegal transactions. With the single stroke of digitalization, the circulation of black money and fake currencies will come to an end.
Cash is the life blood of Indian economy and 86% of the currency circulation in India was mostly in form of cash. Demonetisation made the people to arrive at the bank’s door and deposit their Rs 500 and Rs 1000 notes. RBI announced that banks have received approx. Rs 5.12 trillion of deposits until 18th
November which can be helpful in boosting GDP. Moreover, with digitalization, it would become easier to conduct day to day transactions.
- Curbing terrorism, naxalites and north-east insurgency
These groups are the ones which have been worst sufferers from the move. Demonetisation curbs out the origin of hawala transactions and fake currency which in turn is the main source of funding of these groups. Hawala is a method of transferring money without any actual money movement. Hawala route is used as a means to facilitate money laundering and terror financing. According to an India Today report, one of the hawala operators in Mumbai has destroyed currency notes worth about Rs 500 crores.
With the advent of demonetisation and digitalization, the income tax collection will increase as every form of money whether accounted or unaccounted will make its way into the Banks through formal regulated channels. This in turn will increase the Government Funds, which can later on be used for the feasible purposes.
There are social, cultural and infrastructural drawbacks that hinder the move of India towards a cashless economy. A nation where cash is the life blood of the economy makes it even more difficult as most of the people do not have knowledge of digital transaction as mode of payment while the rest choose to abstain from learning this change.
There is a need of strata of policies and safeguards by the Government to promote the wave of cashless economy and to create a positive aspect of the concept on the whole nation. Meanwhile it is also our duty to accept the change and transform our thinking to welcome a bright future, beneficial for all.
Countries like Sweden, Belgium and Kenya have made steps to become cashless societies so why not India. It’s time for India to welcome the dawn of new cashless century.