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Merits and demerits of cashless economy

It is the dream of our Prime Minister to transform our economy into the cashless economy.However cashless economy has some advantages and disadvantages. Before adopting the cashless economy we need to analyze all these advantages and disadvantages.

Advantages of cashless economy are as follows

Convenient mode of transaction: the electronic transaction is a convenient mode of transaction for its user, because transaction can be done by one click or swiping the card.

Helpful to curb the tax evasion: all the electronic transaction is get recorded automatically, because client needs to use the facility of the bank or other service providers for carryout the transaction. If records of all the transaction are available then it would be very easy for the government to collect the all kind of taxes from citizens.

A possibility of Increase in the tax collectionAll the electronic transaction are get recorded automatically, and the government can access that record very easily that means nobody can evade the tax because of that collection of tax will grow immensely.

Possibility of deduction in the RBIs expenditure if electronic transaction take place on large amount then the requirement of printed notes would be reduced drastically then RBI will not require to spend money for the printing notes.

A possibility of scarcity of money for the criminal activity: usually all the criminal du their transaction in hard currency. If a supply of hard currency disrupted by RBI for converting our economy into the cashless economy then criminals will face the problem of cash crunch.

Demerits of the cashless economy

A threat of online fraud: while doing electronic transaction we indirectly disclose our relevant data on the public platform. However these platforms means banks websites are not completely safe these sites always face the threat from hackers. Apart from all that in these days lot of people are doing the electronic transaction thru Mobil phone than just imagine the situation if somebody lost the his or her Mobil phone, that mean all the confidential information has been lost.

Inconvenient for illiterate persons in our country a sizable number of populations is still illiterate. It would be very difficult for these illiterate persons to adopt the electronic transaction. Even these persons are not aware about the security measures that are why these persons are vulnerable to the fraudulent activities.

Unavailability of infrastructure: To facilitate the electronic transaction specific infrastructure is required like internet connectivity or supply of electricity. However in our country there is a lot of villages ware this type of infrastructure is not available.


Both cash and cashless modes of transaction are equally important for the economy so equal importance must be given to the both modes of transaction.

No economy in world has become completely cashless till now. It is true that in this digital age cashless transaction must be increased to the specific level. However it is impossible to abolish the cash transaction completely. Actually citizens have right to choose the convenient mode of transaction and government should not force the citizens to choose the specific mode of transaction. If an alternative mode of transaction remains available for the citizens then in emergency situation, the transaction system would not collapse completely.

-santosh kamble