YOJANA GIST FEBRUARY 2017 LESS CASH ECONOMY TABLE OF CONTENTS

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2 TABLE OF CONTENTS 1. DEMONETIZATION A LOOK BACK AT THE LAST TWO MONTHS 2 2. FROM A CASH ECONOMY TO A CASHLESS ECONOMY 3 3. DEMONETISATION IMPACTING ELECTIONS 5 4. LESS CASH ECONOMY: IMPACT ON BLACK MONEY 7 5. CYBER SECURITY: ISSUES AND WAY FORWARD 8 6. LESS-CASH ECONOMY: INDIA VIS-A VIS THE WORLD 9 7. ACHIEVING A CASHLESS RURAL ECONOMY DEMONETISATION: A STEP TOWARDS LESS CASH ECONOMY PAYMENT SYSTEM IN INDIA- DRIVING LESS CASH ECONOMY DEMONETIZATION, CASHLESS ECONOMY AND DEVELOPMENT

3 1. DEMONETIZATION A LOOK BACK AT THE LAST TWO MONTHS When 86 per cent of a country s currency, which constituted 12.2 per cent of its GDP, is squeezed out of the market and sought to be replaced by a new currency due to demonetization, an analysis of this decision and its impact is required. STEPS AGAINST BLACK MONEY: The prime minister had proposed to the G-20 at Brisbane that international cooperation in sharing information with regard to base erosion and profit sharing should be expedited. The agreement with Switzerland with effect from 2019, details of assets held by Indian citizens in Switzerland and vice-versa would be provided to each other. Since 1996, the Double Taxation Avoidance Treaty with Mauritius was being renegotiated. Similar treaties with Cyprus and Singapore been renegotiated. The Income Declaration Scheme (IDS) 2016 was highly successful with a 45 per cent tax. The PAN card requirement for cash transactions beyond rupees two lakhs put hurdles on expenditure through black money. The Benami law was legislated in 1988 and never been implemented. The GST, which is scheduled to be implemented this year, will provide for better indirect tax administration and will be a more efficient law will check tax evasion. YOJANA GIST FEBRUARY 2017 LESS CASH ECONOMY THE ADVERSE CONSEQUENCES OF CASH Paper currency is a zero interest anonymous bearer bond. Mountains of cash money reach tax havens through the hawala route from the original paper currency. Cash facilitates real time untraceable payments. Cash is the medium, which funds bribery, corruption, counterfeit currency and terrorism. Reducing cash may not eliminate crime and terrorism but it can inflict serious blow on them. THE MAGNITUDE OF THE DECISION Drop in economic activity on account of the currency squeeze during the remonetisation period would have a transient impact on the economy. The amendment to the Income Tax Act itself provides that the said money, if voluntarily detected, would be liable for differential and high rates for taxation and penalty. THE SITUATION TODAY Economic activity is being restored. Lakhs of crores, which were floating in the market as lose currency, have now entered the banking system. In the medium and long run, the GDP would be bigger and cleaner. Money entering into the banking system and officially transacted would give an ample scope for higher taxation both direct and indirect. The Centre and the state governments 2

4 would both stand to gain. The economy would also be serviced by both cash and highly digitized transactions. LUCKY GRAHAK YOJNA (FOR CONSUMERS) AND DIGI-DHAN VYAPAR YOJNA (FOR MERCHANTS) For promotion of digital payment methods to encourage consumers and merchants to increasingly shift to these payment modes. The Schemes will be implemented by National Payments Corporation of India. Transactions eligible for this scheme should take place through RuPay cards, Unstructured Supplementary Services Data, Unified Payments Interface and Aadhar Enabled Payment System. No charges on card payments at fuel pumps. BHIM will create equality Bharat Interface for Money named after the main architect of the Indian Constitution Bhim Rao Ambedkar. The technology through BHIM will empower poorest of the poor, small business and the marginalized section. 2. FROM A CASH ECONOMY TO A CASHLESS ECONOMY INTRODUCTION: The currency notes of two denominations Rs. 500 and Rs had accounted for more than 85 percent of the total value of banknotes in circulation. We can start with a lesscash society and then cashless society will not be a far-off destination. First in 2014, the government launched the Jan Dhan Yojna which also sow the seeds of a cashless economy. The best way to reduce corruption and black money in the economy is to move from an economy dependent predominantly on cash to electronic transfers. It means a revolution from the fiat money to digital money to curb the flow of black money and increasing transparency of the flow of cash. Internet banking and the recently launched Unified Payment Interface along with the e-wallets are widely used. ADVANTAGES OF A CASHLESS ECONOMY: Various ways like auditing and enforcement agencies with the idea of cashless economy is appealing, as most economic transactions would be part of the formal system and easy to track. The challenge is to strengthen the digital infrastructure of banks and to make transactions safe. 3

5 FOLLOWING ARE THE ADVANTAGES: Convenient Mode of Payment Lower Risks Reduction in the cost of printing money Decrease in Crime Rate Good for the Banking Sector Transparency and monitoring Reducing tax evasion and ensuring transparent functioning of economy However, the flip side of moving towards a cashless economy in a developing economy like India is that for the poor people, cashless transactions are just not practical. Demonetisation has particularly hit the informal society and unbanked community. This section of society would need longer to adapt to move to a cashless society. STEPS TOWARDS A CASHLESS SOCIETY: Lucky Grahak Yojana for consumers Digi Dhan Vyapar Yojana for merchants. Vittiya Saksharta Abhiyan BHIM (Bharat Interface for Money) RuPay Aadhaar Payment App THE SWEDEN EXPERIENCE: Sweden is one of the top five cashless economies in the world. Sweden is the first country to have promised to go 100% cashless by 2020, and leads the race to become cashless society with banks, buses, street vendors and even churches expecting plastic or virtual payment. According to the central bank (the Riksbank), cash transactions made up barely 2% of the value of payments made in Sweden in 2016, and the figure is expected to drop to 0.5% by Circulation of Swedish krona has fallen from around 106 billion in 2009 to 80 billion in Technology plays an important role when we talk about the policy shift from cash to cashless. Swish (a mobile app) allows users to make real-time transactions from anywhere. INDIA AND SWEDEN: A COMPARISON As on 31 December 2015, the population of Sweden was estimated at 9.85 million people; Literacy was almost 100%, India had a population of 1260 million; literacy was almost 75%. The population of illiterate people in India was almost 30 times the entire population of Sweden. Per Capita Income is 435% of the world average in Sweden but 14% in India. In India, 68% of the population lives in rural areas; in Sweden 85.5% of the population of the population is urban. In India, 68% of population lives in rural areas while in Sweden 85.5% population lives in urban area. CHALLENGES AHEAD: Infrastructure and Logistics: In rural India, there are only 20.8% of ATMs of public sector banks and of the State Bank group and 8.5% of the ATMs of private sector banks. Fast and Reliable Internet: E-Wallets and mobile payment systems need a smartphone and an internet connection, 4

6 but less than a quarter of the population owns a smartphone, a fast and reliable internet. Cyber security: remains a key concern. Prevalence of High level corruption YOJANA GIST FEBRUARY 2017 LESS CASH ECONOMY 3. DEMONETISATION IMPACTING ELECTIONS INTRODUCTION: CONCLUSION: Achieving a 100% cashless society will never be possible, but one can always start from a less cash society and then move towards becoming mostly cashless. Though cash will still play an important role for discrete transactions, especially in the most remote areas and informal sector, even these transactions can automated. Digitizing financial transactions can prove to be an effective means of curbing the large parallel economy in India. Fake currencies and their use will fade away and money laundering will go down. IT infrastructure would be required on a ground scale, which India severely lacks even after 70 years of Independence. However, move towards less cash economy depends on how effectively we deal with issues like cyber security, online frauds, financial inclusion into the formal banking sector, awareness campaigning and proper redressal system. Extensive use of money power to influence the voters and win elections is widely in practice. Distribution of money and liquor on the night before elections decide the representatives of the people. An analysis by ADR (Association of Democratic Reforms) shows that in state assembly elections of 2011 in Tamil Nadu, West Bengal, Kerala, Puducherry and Assam approximately 576 candidates were crorepatis and yet 50 percent of them had never filed income tax returns. We see that the seed of corruption sown in elections eventually germinates in corruption in administration in the country. Candidates and political parties spend crores to come to power and when they come to power, they start the collection drive that inevitably leads to a politician-bureaucracy nexus. When the two most important instruments of governance join hands in this unholy alliance, corruption spreads in all directions. STATE FUNDING OF POLLS: The Indrajit Gupta Committee on this subject was set up in The committee suggested only partial state funding of elections and that too with a condition that there must be genuine inner party democracy which no party is willing to consider. Two challenges are great abuse of 5

7 money and voter apathy. Two new divisions were created to address these issues seriously. Both met with significant success, one achieving the highest-ever voter turnouts ever since and the other unearthing crores of rupees and goods including liquor. Some of the landmark achievement included unseating and disqualifying of a sitting MLA in U.P and countermanding two Rajya Sabha elections in Jharkhand. Voter education program sought to educate and motivate voters not to accept money for votes. The National Voters Day on 25 th January since 2011, is the biggest voter enrolment programme in the world. A proactive expenditure control division, a supportive voter education and a watchful media and civil society is needed to control the deteriorating situation. The law prescribes a ceiling on expenditure of the candidates though strangely not on the expenditure of political parties. The absence of ceiling on parties negates the whole logic of ceiling and creates conditions of financial indiscipline. E.g. According to Election Commission, in the 2014 general elections, the amount spent on campaigns was estimated at the staggering Rs 30,000 crore. There is no transparency in the source of the most of donations. It may be foreign money or from crime, drug or real estate mafia. Cash- for -votes notoriety as a regular feature in our elections was conveyed by US diplomatic cables, leaked by WikiLeakes. A Union Minister of Tamil Nadu distributing up to rupees 5,000 per voter in a by-election in After this victory, this notorious Thirumangalam formula was a sure winner for the politicians; which is the biggest challenge. The public perception of the politicians today is that they are all corrupt. Such an image is not good for democracy. India has grown into a major power mainly due to the great political leaders we had. IMPACT OF DEMONETIZATION: It is believed that this move would have a big impact on the ongoing polls in five states, as this is the time that black money is in distribution pipeline. Earlier, disbursal of money to various areas used to take place closer to the date of polling. However, after the ECI drive of cracking down, political parties moved up the disbursal date. That is why announcement of demonetization few weeks before the elections hit the money distribution plans ate the right time. CONCLUSION Demonetization and the subsequent developments have a bearing on electoral reforms leading to a strong banking system and higher level of financial inclusion. The prime minister s directive to party legislators to disclose all their bank transactions since November 8, can be seen as a first positive step towards the financial transparency of politicians. Passing of an act to curb Benami property leads to subsequent crackdown. Moreover, the cashless transactions will ensure higher level of transparency and scrutiny. 6

8 4. LESS CASH ECONOMY: IMPACT ON BLACK MONEY Availability of alternatives of cash in the form of credit/debit cards, electronic wallets, mobile banking etc., has helped in pulling up day-to-day transactions when India decided to fight against shadow economy on November 8. These alternatives of cash support India s march in achieving more transparent and less corrupt society. By moving towards cashless economy in which transactions can be tracked, it has far- reaching consequences on fight against black money, in lifting the tax collections and in ensuring that credit flows to the less privileged. According to a report by PricewaterhouseCoopers in 2015, it pegs cash transactions at 98 percent of consumer transactions in value terms and 68 per cent in volume terms. It is much higher than comparable economies, such as China, Brazil and South Africa. YOJANA GIST FEBRUARY 2017 LESS CASH ECONOMY Digital payments bring in greater efficiency in welfare programmes as money is wired directly to the account of beneficiaries. It will help in fighting the black money as it attacks on non-transparency and anonymity, which is the basis on which parallel economy thrives. It will also reduce real estate prices because of the curbs on black money as most of the black money is invested in real estate, which inflates the prices. In India, less than 5 per cent of all payments happen electronically. RBI has recently unveiled a document Payments and Settlement Systems in India: Vision 2018 setting out a plan and mood to encourage electronic payments in medium and long terms. CONCLUSION: A behavioural change, starting from every individual, can help the nation to weed out the black money. BENEFITS: It will help in achieving the idea of financial inclusion as: High rates of cash movements require money and resources to deal with the cash. In financial year 2015, RBI spent 27 billion on just the currency issuance and management. It could have been used for some other purposes in less cash economy. Less cash economy will also pave the way for universal availability of banking services as no physical infrastructure is needed other than digital. 7

9 5. CYBER SECURITY: ISSUES AND WAY FORWARD YOJANA GIST FEBRUARY 2017 LESS CASH ECONOMY Cyber security is managed and administered through a mechanism called people, process and technology as shown below: The paradigm anywhere any time has been realized by the technological advancement in modern times. The first such system, i.e. all electronic transaction in India, was 1 st demonstrated in Hyderabad in The all-electronic eco system was created and household water bill payment was made electronically. However, digital space is becoming more vulnerable and the term cyber security is gaining ground. The aim of Information Security is to provide Confidentiality (secrecy from others),integrity(secured communication between parties), and Availability of information (C.I.A). The other security objectives include parameters like authenticity, authorization, accounting, and nonrepudiation. Important and Mission critical systems employ several measures to counter the cyber- attacks. These includes several layers of defense (defense in depth) to take care of data, applications, hosts, and networks or perimeter assets infrastructure as shown below: CONCLUSION: Security largely depends on people and process involved as technology installed and configured properly will work as designed. It is the humans, who behave differently. In a time when government is pushing for less cash economy, a secure and reliable digital space will allay the fears of many. Cyber security is also an area for our young engineers to make a career in the field of cyber security. 8

10 6. LESS-CASH ECONOMY: INDIA VIS-A VIS THE WORLD Indian government is creating an ecosystem so as to encourage greater use of electronic payments thereby moving towards a less-cash society. A number of countries including Sweden, Kenya and Brazil have successfully moved towards a less-cash economy. Their experience shows that lesscash economy needs supporting regulations ensuring security of online transaction, robust infrastructure and customer centricity. India vis-à-vis other countries: Modes India Other Countries Cash circulation In 2015, the share of cash circulation as a percentage of GDP was 12.3%. Brazil 3.8% Sweden 1.7% Transactions settled in cash Available Infrastructure Cards (Credit/debit) Point of sale (PoS) terminals Electronic money terminals and mobile-money 68% of total transaction in cash Thailand, China, Brazil have much lower usage of cash In 2015, only 50% of the Indian population had card. One of the lowest numbers of PoS terminals per million inhabitants (1080 in 2015) India has a wireless phone subscriber base of over a billion people as of june Sweden 2.5 (avg. card per person) Brazil 4.1 China 4 South Korea introduced a preferential value added tax treatment for consumers who pay through card. In India, bank charges are deducted making more lucrative for the consumers to pay in cash. Brazil (25,241 per million inhabitant) China (16,602 per million inhabitant) In South Korea 88% of adults had smart phones. 9

11 payment system --- Through Mobile YOJANA GIST FEBRUARY 2017 LESS CASH ECONOMY 2016.Only 0.05 per cent of the total non-cash transactions are made through electronic money terminals that can be accessed through mobile phones. One of the reasons is that smartphone ownership and internet penetration is low. Only 17% of adult held smart phone in For Kenya, it was 26% 10

12 GLOBAL EXPERIENCES AND WAY FORWARD Countries like Kenya have successfully moved towards a less-cash economy by increasing the use of technology-based innovative payment products. In Sweden, most street vendors and small businesses have adopted payment application and PoS card reader. Similarly in Kenya, which is one of the biggest users of mobile money in Africa, M-Pesa is used for paying fees and bills and even receiving salary. In India, there is need to encourage and support the use of payment gateways such as Paytm, PayU etc. Also, there is need promote cashless transaction in informal sector and agricultural sector. Not only will it increase the tax base but it will also help authorities to monitor whether minimum wages are being paid to the workers or not. Several initiatives have been taken by the govt. to bring informal sector into formal sector and promote cashless transaction: National Payments Corporation of India (NPCI) launched Unified Payment Interface which allowed users to transfer funds across two banks using mobile application. GoI passed an ordinance in December 2016, which brings an amendment to provide for crediting the wages in the bank account of the employees or payment through cheque thereby making the transaction cashless. The Village of Ibrahimpur in the state of Telangana has become completely cashless. Banks are also taking lead to promote cashless society by investing in infrastructure such as internet, payment YOJANA GIST FEBRUARY 2017 LESS CASH ECONOMY terminals etc. E.g. A village in Gujarat Akodara has been digitalized by an Indian private sector bank in Delhi metro will go cashless from Moving forward towards a less-cash economy the government must ensure: Neutrality of mode of payment so as not to make cashless transaction costlier by deducting bank charges or fees. Security of information so as to allay the sense of fear among consumers about the safety of their money. Setting-up a robust physical and technological infrastructure to increase the availability, accessibility and acceptability to different payment terminals. Lower taxes so as to make IT devices such as mobile phone and tablets cheaper. Robust e-commerce policy to ensure consumer protection for cashless payments. CONCLUSION: Indian government has taken the right step to move towards a low cash economy. However, in order to succeed the govt. needs to create infrastructure along with right kind of policy framework. 11

13 7. ACHIEVING A CASHLESS RURAL ECONOMY India is largely an agrarian based rural economy with a predominant unorganized sector and per cent of India s population living in rural areas. Rural areas are home to two thirds of the country s population and challenge lies in achieving cashless transactions in these areas. SOME FACTS: There are about 7.8 bank branches for every 1, 00,000 people in India, less than 3 branches per 100 square kilometers. For rural India, the number are less than 1 branch per 100 square km. Access and availability are the main factors determining their choice of a particular bank. RBI figures for July 2016 show that banks had issued million-debit card and 25.9 million credit cards. Noting the fact that, many people possess multiple cards this number does not reflect India s readiness for cashless economy. CHALLENGES OF A CASHLESS RURAL ECONOMY: Currency dominated economy: Cash in circulation amounts to 13 per cent of India s GDP. Transactions are mainly in cash. ATM use is mainly for cash withdrawals and not for settling online transactions. Limited availability of Point of Sale Terminals. Mobile internet penetration remains weak in rural areas. This is being overcome by application BHIM (Bharat Interface for Money) which will work on USSD i.e. without mobile internet. PROSPECTS AND THE ROAD AHEAD Over 93 per cent of people in India have not done any digital transactions. So the real potential lies there. Most of the farmers now have a Kisan Credit Card and no frills account. Hence, agricultural transactions can be made cashless. Although, presence of middle men and traders in agricultural economy make it difficult. The Jan Dhan Aadhar Mobile (JAM) can encourage digital transactions in rural areas. The government can make cashless transactions mandatory for certain payments and make it mandatory for certain services exceeding a certain amount. E.g. Payment for passports can be made mandatory through cashless methods. Cashless transactions can be promoted through 5 A s of promoting financial inclusion which are availability, accessibility, acceptability, affordability and awareness. Special drives through schools, colleges, panchayats etc. can help create awareness about cashless/banking transactions. Financial literacy is must to bring more people on digital platform. Linkage of all welfare activities through bank accounts is a strategic step. Also, sustained focus on different sectors of rural economy can be very helpful such as: Dairy sector Milk farmers affiliated 12

14 to both the state cooperatives and private companies can be promoted to open bank accounts for direct payments into their accounts. PDS outlets Aadhar linked bank accounts, RuPay cards issued by banks, PoS machines etc. can be very helpful to promote cashless transactions at the Fair Price Shops. E.g. Maharashtra government has launched a pilot project to introduce cashless transactions at 84 FPSs using Business correspondent model or payment through USSD and e-wallet facility. Thrust on digital education People must be trained as consumers to use all payment options which are available to them and best suited. CONCLUSION: As the Prime Minister had acknowledged that a cashless society is not immediately possible, we can take multiple steps to move towards less-cash society immediately. Going by the progress so far, it seems that a sound beginning has been made for making rural India a less cash economy. 8. DEMONETISATION: A STEP TOWARDS LESS CASH ECONOMY India has been fighting against black money and money laundering in multiple ways, such as: Formation of SIT on Black Money in Passing of law on Disclosure of Foreign Bank Accounts in 2015 to curtail benami transactions. Income Disclosure Scheme 2016 to declare domestic black money (deceleration of more than 67,000 crore were made under the IDS 2016) All of these efforts brought Rs lakh crore of black money into open so far. Government also demonetized five hundred and one thousand rupee note in November On one hand, govt. has waged a war against the black money and on the other hand, it has laid emphasis on promoting digital banking and e- payments. VARIOUS INCENTIVES GIVEN BY THE GOVERNMENT TO PROMOTE CASHLESS ECONOMY IN THE COUNTRY: The Central Government Petroleum PSUs shall give incentive by offering a discount at the rate of 0.75 per cent of the sale price to consumers on purchase of petrol/diesel if payment is made through digital means. The central government through NABARD will extend financial support to eligible banks for deployment of 2 PoS devices in 13

15 1 lakh villages with population of less than 10,000. Railways, through its suburban railway network, shall provide incentive by way of discount up to 0.5 per cent to customers for monthly/seasonal tickets if payment is made through digital means. TRAI has decided to reduced the USSD charges from the current Rs per session to Rs per session for transactions relating to banking and payments. All railway passengers buying online tickets shall be given free accidental insurance cover of up to Rs. 10 lakh. For the payment of toll at Toll Plazas on National Highways using RFID card/fast Tags, a discount of 10 per cent will be available to users. 9. PAYMENT SYSTEM IN INDIA- DRIVING LESS CASH ECONOMY Payment System is defined as a system which enables payment of a liability, typically without involvement of movement of cash or legal tender. In order to process a payment without movement of cash, the payer and the receiver of the payment have to be within the ambit or participant of a payment system. EVOLUTION OF CASHLESS PAYMENT SYSTEM IN CURRENT TIME: CONCLUSION: With all the aforesaid measures, it is expected that the demonetisation will go a long way in expediting and pushing the process of digital banking to new heights in shortest possible time. In the traditional paper-based payment system, a cheque in its different forms was the first instrument of a cash less fund transfer transaction through an inter-bank payment system. The advent of technologies helped in introduction of mechanization through electronics was the introduction of MICR (magnetic ink character recognition) technology for cheque process in RBI started paper-less electronic clearing services (ECS-Cr) in mid 1990s, first for credit transfers. Then came electronic fund transfer (EFT) where a customer of one bank can pay to a customer of another bank through an electronic instruction. Later, it evolved as NEFT (National electronic Funds Transfer). Card based transactions opened up a new horizon in making payments anywhere. Linking of all banks ATMs enabled withdrawal of cash from any ATM. The ATM card evolved into the debit 14

16 YOJANA GIST FEBRUARY 2017 LESS CASH ECONOMY card which has become a versatile card as it can be used for multiple purposes. 10. DEMONETIZATION, For large value payment system, RBI established- Real Time Gross Settlement CASHLESS ECONOMY (RTGS) system in AND DEVELOPMENT To create a central trusted counter party in order to settle the transaction between two participants, Payments and Settlement System Act was passed in 2008 which empowered RBI to authorize payment system. The National Payments Corporation of India (NPCI) and Clearing Corporation of India Ltd. (CCIL) are two of the major authorized organisations permitted by the Reserve Bank to offer payment systems. NPCI has rolled out a variety of payment products which include: IMPS Immediate Payment System NACH National Automated Clearing House CTS Cheque tranquation System AEPS Aadhar Enabled Payment System UPI Unified Payment Interface *99#- based on USSD Unstructured Supplementary Service Data RuPay Debit Card NPCI is also establishing a retail bill payment system BBPS Bharat Bill Payment system. There are many payment service providers offering wallet services such as PayTM, Billdesk, CC Avenue etc. The proliferation of mobile technology has opened up a channel to make cashless payments accessible to all. CONCLUSION: Above payment systems have brought down cash payments and even transactions through cheques are not growing at the levels which were seen earlier. Payment systems are at the forefront of moving towards a less cash economy. Demonetization is an act by which government of a nation strips the circulation of one or more than one currency unit of its status as a legal tender. The first demonetization in the independent India was done in year 1946 and another in WHY EARLIER EFFORT OF DEMONETIZATION WERE NOT SUCCESSFUL? Demonetization was not successful then, because only a very small proportion of total notes in circulation were demonetized. Notes demonetized in 1946 were of the value of Rs crore. As far as the demonetization of November 2016 is concerned, the currency constituted a share of 86 percent of total circulated notes. Size of economy, the growth rate, and the role of private sector and service sectors to the growth of economy was small in year 1946 and 1978 compared to The number of people within the net of the income tax was also not so large during that time. In the year 1946 and 1978 public were already aware that the demonetization will be introduced by the government sooner or later, therefore, the demonetization at that time could not produce any substantial gain to the economy. 15

17 economy. CASHLESS ECONOMY It is an economic system in which transactions are not done predominantly in exchange for actual cash. There is a strong negative correlation between cashless transaction and corruption. Sweden, where 89% is no cash payment, ranks 3rd in Corruption Perception Index. In India, an estimated 22% is non-cash payment and it ranks 76th in that index. Fact: Cash to GDP ratio for India is while that of Sweden is It will curb the incidents like money laundering and hawala transactions. The demonetization has inflicted a big blow to the terrorists and Naxalite funding. The cashless transactions will check the use of counterfeit currency and discourage terror funding Demonetization, if done in regular intervals, will check political corruption and spending of illicit money during election. It will help the nation to achieve a real and cleaner economic growth with lower income inequality and greater distributive justice. DEMONETIZATION AND CASHLESS ECONOMY: PERSPECTIVES The perspective on benefits are as follows: It will check money hoarding and as a result, more money will enter the banking system, which in turn will boost investment. The opening of new bank accounts for depositing the banned currencies and deposit of huge amount in Jan Dhan account has shown the spread of banking literacy among the general population. It has strengthened the banking system, as many bank branches were facing acute problem of NPA (non-performing assets). It will increase the tax collection, which in turn will increase the welfare spending by the government. During the re-monetization process, the supply of money and liquidity flow to the market will be slow. It will help in controlling the inflation. It will expose the people who have earned the black money, which will help in creating a corruption free society. This, in turn will enhance the flow of FDI to the SUGGESTIONS: It should be a continuous exercise by the government and be repeated at regular interval. It would promote cashless transaction and will curb hoarding of money. Tax net needs to be increased with exemption to poor and lower middle income group. The size of the informal economy needs to be curtailed. Government needs to take steps to reduce the interest charged on debit/credit cards. Adequate number of bank branches need to be opened in rural areas. Safe digital ecosystem must be created to generate a sense of security among people. Like Pulse Polio Campaign, the Digital India Campaign must be conducted at mass scale twice or thrice in a year. All the line department functionaries such as school teachers, health workers, anganwadi workers etc. must educate the people about the financial inclusion and 16

18 digital transactions. Strong political will among different parties is necessary to achieve the objectives. CONCLUSION: The Crisil Report says that the demonetization move could change the face of the Indian economy. The move could stifle some business that are legal and clean, if they use cash payment. But everyone will adjust. And while it can hurt some small business and individuals, it is better to do it than not. Demonetization and cashless economy in the long run will have negative impact on black money and positive impact on economic growth and development. 17

19 24Years ofexcelence Selection TilDate. 361Selection incse inTop10 incse2015. PresenceAcross 14CitiesinIndia