Prime Minister Narendra Modi admitted on Sunday that he understands making the transition to cashless economy is difficult and hence he urges people to move to less cash society. However, the whole exercise of moving from cash-driven economy to cashless economy has somehow been mixed with demonetisation which was apparently done to suck out liquidity from the system to dig out black money.
It is a mammoth task to achieve even one of the two. Aiming for both in one move is risky and to some extent reckless. Indian society functions primarily on cash due to lack of penetration of e-payment modes, digital illiteracy of e-payment and cashless transaction methods and thirdly habit of handling cash as a convenience.
If the move was aimed at turning India into a cashless economy, then the ideal thing to do was to make people adopt e-payments as a change of habit and not as a last ditch option in a cashless crisis situation.
The government should have given enough incentives to people to move to cashless transactions, ensure small vendors are equipped with point of sale terminals or e-wallets to take payments and wait till the time the country actually comes on board the digital India boat. If a majority of the population is first allowed that chance to move to e-payments via change in habit, such a liquidity cut would not turn out to be as big an issue as it is today.
The government has made further attempts to push its departments from cash transactions to cashless transactions. Urban Local Bodies of 4,041 cities/towns in India where at least 30 crore of the urban population resides have been told to shift to cashless transactions.
Officials have been directed by the government to promote internet banking services like RTGS/NEFT, online banking via credit/debit cards or by way of Public Finance Management Systems (PFMS). The Urban Development Ministry has said that both income and expenditure will shift online.
Now, this will mean that people will have to make e-payments in matters of property tax, professional tax, utilities like water, power & gas, fee and licensing charges, online bookings of community halls for functions, issuing or renewal of birth and death certificates, registration of shops, library membership et al.
It has also directed wages to be transferred through e-payment channels for both regular and contractual workers, payments related to any work whether contractual or not, procurement of articles, beneficiary transactions etc.
In rural areas, farmers and poor people are still struggling to get their hands on their own money. They are selling their produce in mandis at throwaway prices because buyers don’t have cash to pay them. Mobile ATMs and Micro ATMs have been a rare sight and normal ATMs usually stay shut at least a couple of days every week now. So the change in habit seems to be forced rather than incentivised and simplified for convenience. Also, it remains limited to urban areas. Rural population is left in worse off conditions.