The current Indian government’s stance on monetary flow and taxation in the country and the surprise banning of the largest currency bills last year took many by surprise, with many economists skeptical about the success of demonetization. The government endorsement of further digital payment methods has elucidated its perspective. However, one is forced to ask if India is ready to become a cashless economy.

With billions of transactions done every day in cash, India is far from being a “cashless economy”. Almost all transactions done through ATMs are for cash withdrawals. The program of financial inclusion launched in 2014 registered millions. However, as per reports by the World Bank, 43 percent of Indian bank accounts are dormant and India is the second most unbanked country in the world, with China being the first.

Additionally, digital payment requires a digital medium, and only 26 percent of India’s population has access to Internet facilities and only 17 percent of adults have smart phones. Feature phones are still in use by the majority. Availability of such infrastructure is even lower in rural areas that account for two-thirds of India’s population. Most marketplaces and even governmental institutions do not have PoS (Point of Sale) machines of which there are 856 machines per million people in India.

Cybersecurity, the lack of technical knowledge and unaffordability are some of the other hindrances to realizing India’s dream of a “cashless economy”. Until the necessary infrastructure and media are developed, it seems unlikely that this dream will come true anytime soon.

Mohammad Amir Khan