From the 2019-20 Union Budget, it is evident that the Govt. of India is trying to promote digital modes of payment. The 2% tax deducted at source (TDS) on cash withdrawals exceeding Rs.1 crore in a year and removal of charges on Merchant Discount Rate (MDR) for business with an annual turnover of Rs. 50 crore and offering low-cost digital modes of payments are two critical instances that validate the fact that the government is trying to build a cashless economy. Some more instances are Demonetization, UPI, PMJDY scheme, Direct Benefit Transfers, etc.
Cashless transactions offer many benefits, such as:
• Increases financial inclusion and results in increased tax revenues
• Helps in tracking illicit transactions
• Reduces the cost of printing, storing and transporting cash
India looks ready for a cashless economy. Here’s why:
• There wouldn’t be any tax levied on UPI, BHIM, and debit card transactions below Rs. 2000
• Internet users in India are expected to cross 627 million by the end of 2019, and that’s approximately half of India’s population
• Referral and cashback schemes were launched for BHIM users
• As a result of demonetization, there has been a rapid transition to UPI apps such as Google Pay. The convenience of UPI payments increased the net revenue of Google Payments India by 83% in 2018. This shows positive growth in the UPI payment mode’s usage.
However, there are a few roadblocks that need to be overcome for making India a cashless economy:
• Although internet penetration has increased, a considerable % of local stores in India still don’t use digital transaction modes
• Security of cashless transactions is a significant cause for worry
• Illiteracy in Rural India is still a concern and almost a quarter of the rural populace doesn’t even have mobile phones