Government’s decision to scrap Rs 500 and Rs 1,000 notes will accelerate the push towards electronic payments system, which currently has relatively little penetration in India, IT trade body Nasscom said on Wednesday. “If most of the black money is brought into bank accounts or into the tax net, there will be far less reason to deal only in cash, and far more reasons to transact through electronic payments,” Nasscom President R Chandrashekhar said.
Chandrashekhar is also a member of the Ministry of Finance Committee on Digital Payments, chaired by Ratan P Watal of NITI Aayog. In a statement issued, Nasscom noted that electronic payment has relatively little penetration in India, where cash accounts for 78 per cent of all transactions by value according to the Reserve Bank of India.
The move will make a major dent on unaccounted or ‘black money’, rendering it valueless unless it is taken to a bank to get exchanged, potentially bringing it into the tax net, it said.
Nasscom further said it is also a welcome move for the e-commerce industry, where a large number of deliveries in India are ‘COD’ or cash on delivery, raising logistics costs and risks.
“While other reasons for use of cash, such as trust, may take longer to alleviate, the present announcement could mitigate a significant factor driving COD, the availability of unaccounted cash,” it said.
The IT body, however, pointed out that replacement of old Rs 500 and Rs 1,000 notes with new high denomination notes in due course could be a “potential dampener” as high value currency notes constitute the foundation of black money and the cash economy.
“This historic step by the government could, if optimally leveraged, hugely accelerate the migration to a digital economy,” it added.