And Cash is Back to Being The King!
Well all that hullabaloo about Demonetization and Digitization seems to have faded and people seem to be going back to their cash friendly days. The famous words by Mark Knopfler of Dire Straits “Money for Nothing..!” can be rephrased as all that “Drama for Nothing…!” There’s been hardly any accountability for black money and hardly any improvement in internet services to facilitate digital India. But what did happen was UP elections were won, nay, swept up like never before by the ruling central government.
All that hue and cry about PayTm and Bhim App has kind of fizzled out a bit, the sparks for mobile wallets seem to have faded. A recent report by Hindustan Times, dated 9th of March, 2017 states that Digital payments are on the decline. Restaurant and sweet shop vendors that operate out of smaller outlets and whose businesses had been greatly affected by Demonetization, claim that their customers hardly opt for digital payments any more. Even flea market shop owners in places like JanPath and Lajpat Nagar in Delhi have reported a significant shift towards cash payments by their customers.
So much for the huge marketing strategy behind BHIM (Bharat Interface for Money) App, which was launched by National Payments Corp. of India, even though it still has a huge subscriber base of more than 125 lakh Indians.
The drop in value and volume of transactions
The digital Transactions in December’16 in India were valued at Rs. 105.04 lakh crores, i.e approximately 9,575 lakh transactions, and this has apparently come down to 7,630 lakh transactions in February’17. With remonetization it’s become quite apparent that cash is the king and the most preferred source of transaction even now. Post remonetization, now the Govt. has withdrawn all restrictions on cash withdrawals from bank accounts as well as ATMs.
While UPIs show a robust usage, the number of credit/debit card, wallet and mobile transactions are showing a declining trend. Not only is availability of cash a reason, but also the taxes levied on card transactions are proving to be party poopers. As also majority of outlets not having digital payment avenues.
The story revolving around ATM too continues to be that of a flip flop, where some ATMs are still running dry, especially during long weekends. 60% of money has only been replenished in the Indian economy, and that too in a country where 85% of transactions take place in cash. And, combined with the fact that Digital transactions are down, we are at a paradoxical threshold in our economy.
The recent RBI study throwing light on these facts, force us to mull about the fact that the entire effort to digitize the economy shouldn’t come to naught and the economy shouldn’t fall back into the limbo as before with a flourishing parallel economy that was proving to be a huge burden to national exchequer.
Sr. Faculty, INLEAD