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Now a days the word digital is being often used, especially when talking about economy and economy’s growth. Digital economy is one collective term for all economic transactions that occur on the internet.
Digital economy may be said to be an economy which focuses on digital technologies which is based on digital and computing technologies. It basically covers the business, social, economic and cultural aspects by the web and digital communication technologies. In the earliest days, digital economy was known as internet economy due to its reliance on the internet connectivity. Businesses that have adopted and adapted internet transactions and technology gets the most benefit by this digital practice, because digital marketing not only ease the selling process but also buying, distribution, advertisement aspects.
WHAT IS MEANT BY CASHLESS ECONOMY?
A cashless economy is a system where any type of transaction is done through digital means such as debit card, credit cards, electronic fund transfer, mobile wallets, mobile payments, internet banking, UPI, and other payment channels. In the past few years many countries are going cashless. Canada, Sweden, USA, China, France, UK are the example of countries going cashless and using much more of digital transactions over cash payments. Sweden is the top most country who have taken cashless economy wholeheartedly and uses only 15% of payments involving cash.India is also moving towards the cashless economy.
To make India a cashless economy, during the Union Budget 2019-20, the Finance Minister had stated that 2% tax deducted at source will be levied on cash withdrawals that exceed Rs. 1 crore in a year from the bank account to discourage the practice of making business payments through cash transactions. The govt of India has also said that the businesses getting an annual turnover of Rs.50 crore can offer low cost digital modes of payments and also no charges will be imposed on them or their customers. But going totally cashless is a great challenge for the Indian govt because of the dependence on informal sector of Indian economy. Almost 90% of the transaction in India takes place in cash payments.
BENEFITS OF TRANSFORMING TO CASHLESS ECONOMY
• Helps fighting corruption: Cash is difficult to trace in the whole economy. Cashless technologies can be used as a helpful asset in fighting corruption. Every person being connected through e payment system – a cashless environment – can form a transparency of money flow. Every transaction and every payment being made digitally helps you see where the money comes from, where it went and how it was spent. Any sum of money coming or going outside the framework can be easily detected by the law enforcement and forensic accountants, making it easier for them to identify hidden money.
• Using cash results in more expense: Printing the currency requires a significant amount of time and efforts. RBI spends more than Rs.31 billions on printing the currency. Bringing the money through the system and the consumers is also a task requiring efforts. Paper currency is the mostly used form of cash which has its own shelf life and has to be replaced over a time period.
• Easier International transaction: Cashless economy not only helps in making easy e-transaction in the country itself but also for international transaction. This system benefits the business mans involved in international buying and selling. The process of buying and selling can be easily made using e-payments, it includes lesser time and efforts.
• No cash management: Businesses earlier needed to store money, get more of it when they run out, and deposit cash when they had too much on hand. Going cashless made them get away from such troubles.
DEMONETISATION GIVING RISE TO DIGITIZATION
On 9 November 2016, the govt of India demonetised all Rs.500 and Rs.1000 note. Main aim of demonetisation was to eradicate the black money from the economy and put an end to the fake currency being used all over India. This resulted in one of the positive consequences – Digitization of Indian economy. After the demonetisation the money was banned over the night, people started looking for alternative options which did not involve use of cash. This led to adoption of digital payment and e- transactions in the economy. It would be unfair to say digitization wasn’t used earlier, the path towards digitization has started much earlier by usage of smartphones, start-up of e-companies, rise in e-commerce etc, but after demonetisation the use of such technology got accelerated.
Govt of India also launch apps like BHIM (Bharat interference for money). This app not only works as a wallet for online transactions but also helps to transfer money from one bank account to another without loading any money from third party. There are many other trust worthy e-wallets such as Paytm, Freecharge, Google pay, PayUMoney etc. These apps are being used widely all over the nation.
Cashless economy has benefited a society in many ways but it also has its own disadvantages like for the poor and illiterate people who has no knowledge about using smart phones and technologies involving e-payment methods. On many online transactions there are some GST charges and other taxes which is deducted from the owners account, so people who are trying to save money try to avoid such transactions. Govt and other private companies working with e-transaction should show some focus on such elements which makes people run away from digital economy and should spread awareness to consumers having no knowledge about digital technologies.