‘India can save Rs 70,000 crore by reducing cash transactions’

‘India can save Rs 70,000 crore by reducing cash transactions’

India can save up to Rs 70,000 crore in the next five years by widening the digital transactions base and thus reducing cash handling, says a study released by the credit card company Visa. Its report, 'Accelerating The Growth Of Digital Payments In India: A Five-Year Outlook', says the cost of cash places a huge burden on the economy which is equivalent to 1.7 per cent of the GDP. Time cost of cash handling, forgone interest earnings, bank charges, depreciation and cost of risk together make up the gross cost of cash. By reducing dependency on cash, the cost of cash percentage can be reduced from 1.7 per cent to 1.3 per cent in five years and it could reach Rs 4.7 lakh crore by 2025.  

Households in India hold majority of their assets in real estate and gold. Cash savings amount to 40 per cent in urban areas and 27 per cent in rural areas. Cash payment is made mostly to merchants and daily labourers. This contribute to the prevalence of a large shadow economy, which is about 19 per cent of the GDP. The forgone tax revenue from this is 3.2 per cent of the GDP. The government's lack of focus on financial literacy is a major hindrance to the growth of digital payments. 

The report says the government should consider incentivising small and medium-sized enterprises (SMEs) to reduce cash transactions. For this, banks would have to invest about Rs 11,891 crore on network expansion and upgrades. The adoption of digital procurement cards by the Government of India’s nearly 70 departments could yield additional savings. Governments worldwide have benefited significantly by adopting this approach.

According to 2016 Moody’s analytics study, card usage added $296 billion to global consumption between 2011 and 2015. 

This browser settings will not support to add bookmarks programmatically. Please press Ctrl+D or change settings to bookmark this page.
Topics : #economy

Related Reading

    Show more