Tuesday , November 21 2017

Demonetisation could spark a new digital economy in India

Demonitisation have become an unexpected boon for Paytm and MobiKwik.

demonitisation

As a historic opportunity to pull out evils in the nation’s shadow economy, the Indian prime minister, Narendra Modi, has proclaimed that all 500 and 1000 rupee notes have been taken of their status as legal tender, as his party strengthens its assault on “black money.”

The two big notes make up about 86% of the money in flow by value in India and signify the maximum—and most common—currency denominations. Their demonetisation has been praised and condemned in the worldwide media—and the individuals of India themselves are similarly split.

Why to demonetise the notes? India’s ministry of finance has specified that the intention is to curb financing of terrorism and other subversive actions through the proceeds of fake notes. It also targets to confine the Digital economy in India, the main carter of inflation that badly affects the poor and denies the government of its tax revenue. Moreover, it is anticipated that the move will lessen cash circulation in the nation—as most corrupt actions and illegal transactions are done through cash.

The unexpected move is also expected to uncover people’s real income and confirm those falling under particular pay taxes punctually. Just 1% of the country’s individuals are paying income tax.

Cashing out

In Western countries, many people would likely consider that the revocation of specific bank notes, though inconvenient, would be no problem. Moreover, the big majority will have bank accounts, debit and credit cards to use. But in India, it is completely different—banking is still measured to be a luxury for the maximum people who are below the poverty line. In spite of present government attempts to make sure financial presence, many still use only currency notes and coins to pay for everything. Moreover, it is projected that 95% of transactions in India are made by using cash, and for those collecting money away, it is a need to survive.

Though the demonitisation declaration came as a surprise to some segments of the public (and numerous politicians), the ruling party has been firm to eradicate black money from the instant it had taken power. An exceptional investigation team was set up in 2014 to control the hazard of black money, and the screws of integrity have been progressively tightened through the modification of a series of measures, such as the double taxation avoidance contracts.

Social help

However its intentions for the nation’s economy appear positive, the demonitisation move has not been well attained by the common man. Tempers are blazing and some are threatening of riots over the sudden change. The poor, who are idle to dealing with banks, have mostly been left by experts to wait in long lines outside financial organizations simply to figure out what to do with their currency notes.

Social media has been swamped with rumors—and treachery theories abound. They embrace the notion that the new 2,000 rupee note has an entrenched electronic chip. But individuals are also using social media sites to ensure that no one loses out and are crowdsourcing and sharing info on what to do and where to go.

Digital banking companies have also grown to the challenge, fixing up shop in more convenient places to let individuals to sign up and use their cash as they wish. Paytm, an e-wallet firm, has seen a vast upsurge in their transactions —even a roadside stall has begun to accept payments through e-wallet.

The ban of currency notes has also carried India’s first “digital and cashless village,” Akodara, which is about 60 miles from the north city of Ahmedabad, into the limelight. Most of the 1,200 persons living in Akodara buy the whole thing from wheat flour to potato chips over mobile banking and have little to worry about when it arrives to the demonetisation.

The Reserve Bank of India has also been cheering citizens to make use of internet and mobile banking at least in the short term as it works to “alleviate the pressure on the physical currency.”

True though it may be that demonetization has brought with it an inevitable slowdown, the act could be the start of a new Digital Economy for India—one that is far more inclusive, and aids to educate the people of India on the aids of transactions in a digital world.

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