India not ready for oncoming digital economy

India's Prime Minister and Finance Minister have announced a digital currency drive stoked by the non-availability of cash after a demonetisation exercise aiming to uncover black money currently in circulation rather than by demand, claimed Deccan Herald. The India-based publication listed an underdeveloped banking sector, poor digital infrastructure and low digital literacy as reasons for the country's unpreparedness for digital currency, adding, "it will take a long time for the infrastructure to be built, skills to be imparted and mindsets to be changed".

The government has opportunistically changed the theme of demonetisation from elimination of black money to creation of a cashless society. It was probably forced to shift the objective because the exercise may not lead to unearthing of all the

black money, as it was originally claimed, but to the laundering of most of it. That will leave the government with little justification for the hugely disruptive exercise. So, both the prime minister and the finance minister are now talking of a push to digital currency, which is another impractical idea being forced on an unprepared society. The consequences of going in for a cashless dispensation by Caesarian section will not be good for the society and the economy. The government has announced some incentives for moving to the age of electronic transactions. The non-availability of cash has also introduced elements of inevitability and even coercion into the programme.



Between 90–95% of the financial transactions in the country are in the form of cash. Moving to a digital economy is almost impossible for most people in the foreseeable future. The challenges and difficulties are many. The banking sector is still underdeveloped. The digital infrastructure is very poor. Internet connectivity is bad, payment interface is inadequate and digital literacy is very low. With internet penetration at 30% and smartphone penetration at 17%, the cashless option will be available to only a small minority. Most small establishments and many bigger ones do not have Point of Sale terminals. Incentives will not make much difference to the charges on merchants. Internet and power failures are common. Cyber security is a major concern and there are many legal and practical problems and regulatory issues connected to it. All these problems will be magnified many times in small towns and

villages. When illiteracy is so high, the talk of teaching people the basics of digital deals on mobile phones is foolish and unrealistic. The situation gets more complicated with a large number of people on the move, with no identity indicators and numbers.



The digital push was, in any case, possible without demonetisation. It will take a long time for the infrastructure to be built, skills to be imparted and mindsets to be changed. The rising pitch about the cashless economy may be a sign that the actual cash will come much later than promised. The trauma and inconveniences of the cash drought are going to continue, and most people will not able to use the digital tools. It is a cruel idea being sold to the people: If you don’t have the bread of currency, eat the cashless cake.



