Cashless India Case Study
The demonetization, by removing 86% of the currency in circulation, has resulted in a very severe contraction in money supply in the economy .This contraction , by wiping out cash balances in the economy, eliminated a number of transactions for a while, since there was no or not enough of a medium of exchange available.
Since income and consumption are intrinsically related to transactions in the economy, the above meant a severe contraction in income and consumption in the economy. This effect was more severe on Individuals who earn incomes in cash and spend it in cash.
In terms of the sectors in the economy, the sectors that were adversely affected were all those sectors whose demand is usually backed by cash, especially those not within …show more content…
On a sectoral basis, the commodities and agricultural sector, including the market for consumer durables and non durables felt the heat. In the short term, large denomination purchases was made via electronic purchases rather than through brick and mortar outlets. This will impact the retail sector …show more content…
One immediate outcome of a cashless India would be a sharp rise in Indirect taxes compliance. Traders, small businesses, shopkeepers, and consumers routinely use cash as a means to avoid paying service tax, sales tax, VAT and any number of indirect taxes and fees. This mindset needs to be changed if the imminent Goods and Service tax(GST) regime is to actually work. Brutally enforcing a cashless payment system- by sucking out 86% of paper money and letting people flounder for a period in a condition of acute paper money scarcity- is perhaps the quickest means to get there.
Apart from the state, another big beneficiary of a cashless India is finance capital. At present, India’s low income households access credit through informal systems-be it a pawn broker or employer or a relative with cash savings. This informality has been partially dented with the arrival of self-help groups that can access formal credit .But given India’s population, both the debt and the savings of the working classes constitute an enormous market that global finance has been so far been unable to access .Forcing them to shift to cashless payment platforms instantly formalizes this world of
Since income and consumption are intrinsically related to transactions in the economy, the above meant a severe contraction in income and consumption in the economy. This effect was more severe on Individuals who earn incomes in cash and spend it in cash.
In terms of the sectors in the economy, the sectors that were adversely affected were all those sectors whose demand is usually backed by cash, especially those not within …show more content…
On a sectoral basis, the commodities and agricultural sector, including the market for consumer durables and non durables felt the heat. In the short term, large denomination purchases was made via electronic purchases rather than through brick and mortar outlets. This will impact the retail sector …show more content…
One immediate outcome of a cashless India would be a sharp rise in Indirect taxes compliance. Traders, small businesses, shopkeepers, and consumers routinely use cash as a means to avoid paying service tax, sales tax, VAT and any number of indirect taxes and fees. This mindset needs to be changed if the imminent Goods and Service tax(GST) regime is to actually work. Brutally enforcing a cashless payment system- by sucking out 86% of paper money and letting people flounder for a period in a condition of acute paper money scarcity- is perhaps the quickest means to get there.
Apart from the state, another big beneficiary of a cashless India is finance capital. At present, India’s low income households access credit through informal systems-be it a pawn broker or employer or a relative with cash savings. This informality has been partially dented with the arrival of self-help groups that can access formal credit .But given India’s population, both the debt and the savings of the working classes constitute an enormous market that global finance has been so far been unable to access .Forcing them to shift to cashless payment platforms instantly formalizes this world of