The government’s push towards a digital economy by incentivisation is a move in the right direction. But there are enormous challenges ahead. The electronic infrastructure space is still under-developed in India, technology governance is weak and cash will continue to play a significant role just as it does in developed countries. The decision to give discounts on a variety of transactions, from online purchase of train tickets and use of credit and debit cards in fuel stations to buying of insurance policies from state-owned insurers, has come a month after the demonetisation decision of November 8. It seems aimed at shoring up the government’s changing narrative on demonetisation — from being a measure aimed at eliminating black money and corruption to a move that will propel India towards a less-cash economy.
But the path to a digital economy is also beset with many barriers. For one, the e-infrastructure today is woefully inadequate to serve the people in semi-urban and rural areas. Internet penetration is low at 30 per cent, and smartphone penetration lower at 17 per cent. What complicates the problem is the changing postal address of people given that the India story of recent times is a story of migration, of the young moving from one place to another, in search of jobs, businesses and education. Then, rural India is a world where small establishments do not have Point Of Sale (POS) terminals and even those that have them not only give discounts on cash purchases but also charge extra on a card transaction. The second issue relates to governance. There have been 30 Internet blackouts across a dozen states in the last three years, adding up to 250 days. Clearly, the government itself is a hurdle to its digital push. The blackouts were for a variety of reasons — unrest, communal violence, examinations. Anomalies also exist in the form of gaps in the regulatory mechanism of credit and debit cards, and mobile wallets. For instance, the discount rate, charged to a merchant accepting card payments, and sometimes to consumers, is by the banks themselves, and not by the regulator — the Reserve Bank of India, in this case.
Though the government has not specified an end date for e-discounts, they are expected to continue for a while because the digital economy has become the most significant end objective of the demonetisation drive. This narrative is unlikely to change any time soon because the availability of cash in the bank branches and ATMs continues to be meagre. It will make immense sense for the government to take a holistic view on what it takes to be a less-cash economy, and not strive to be a cashless economy.