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Merits and Demerits of Cashless economy


On 8th November 2016, our honourable prime minister of India,Shri Narendra Modi made an announcement that the 500 and 1000 rupee notes would be banned. With this announcement 86% of currency notes in India were just mere pieces of paper. The main objective was to curb black money and eliminate circulation of fake currency in the Indian economy. India is a cash centric economy where less than 5% of all transactions happen by money. But with demonetization there resulted a currency crunch and many people started making online payments. Thus Demonetization took an unprecedented turn of trying to make India move towards a cashless economy. Cashless transaction means using debit, credit cards, internet banking , e-wallets for making payments instead of paying in hard cash. Cashless economy has its own pros and cons.

Merits of cashless economy

  1. Electronic payments will help business people to boost their customer base even in far of geograhic locations and hence will result in enhanced business
  2. The real estate prices will come down because of curb on black money, as most of the black money is invested in Real estates
  3. Electronic payments will improve transperancy and accountability. Most of the cashless societies are corrupt free as all the transactions are being traced , are visible and are transparent.
  4. Making online payments are handy and it will lead to slim wallets as people need not carry cash.
  5. Majority of election funding is done through Black money. Cashless transactions will make it impossible for political parties to spend thousands of crores of unaccounted money on elections. Buying votes by giving cash will also come to an end. True democracy will come into picture.
  6. Amount of tax collected will also increase, and it can be spent for the betterment of poor and under privileged people.
  7. Generation of counterfeit currency will be reduced and hence terrorism can be prevented.
  8. It will reduce pickpocketing and robbery of cash in crowded locations.
  9. Through online payment one can view history of their expenses and plan their budget in a smart way.
  10. Printing costs of notes and maintenance itself is accounting to 27 billion; this can be removed by electronic payments as there would be no need of paper currency.

De-merits of Cashless economy

  1. Many of the rural people and even some urbanites still do not have a functional bank account in order to make online payments.
  2. A majority of India�s population is in rural locations, and there are no proper internet facilities available to make online payments.
  3. People in rural areas are not educated about the digital mode of payments.
  4. There are still some places which take cash and do not accept cards. Making a purchase at such locations with card becomes difficult. Small retailers in India still deal only in cash as they cannot afford to invest in digital infrastructure.
  5. Cash is not under your control, you will try to spend excessively.
  6. If you lose your debit/credit card, it takes some time to get a new one.
  7. Hacking and cyber theft are challenging problems which can be caused by online transactions. Cyber Security measures have to be brought in place to prevent money going into wrong hands.
  8. Even in big cities, sometimes online transactions cannot be made because of poor internet facilities.

In a country like India where cash is more pervasive it requires sometime for India to take a transition towards Cashless economy. Meanwhile the government of India has to address many challenges to meet the objectives of cashless economy. The government has to provide internet facilities and financial literacy to all its people. While a cashless economy is still not here, the move towards less cash economy is on the move.

- K.P. Nagasaritha