Digital Transactions drop in India: Cashless Economy dreams may hamper

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Image Courtesy: hindustantimes.com

On the 8th of November 2016, Prime Minister Narendra Modi made a declaration that brought a tremendous change in the Indian economy. The demonetisation of 86% of currency in circulation was introduced in order to curb the circulation of black money. It also aimed to create a digitized nation that thrived on electronic payment, so as to boost transparency.

But lately, the surveys show a slightly different story. Central bank data shows that digital transactions have witnessed a decline. This drop may have occurred due to the announcement of lifting the cap on cash withdrawal. This means that from next week, Indians will be able to withdraw as much money as they like from their bank accounts.

The Reserve Bank of India lifts the 50,000 rupee a week limit, and now cash withdrawal from your bank account will be limitless. Printing presses are churning out new bank notes and come Monday, this rule will come in action.

The government’s clampdown on cash lost the economy a few billionaires last year though the richest hardly saw their fortunes hit. Economists including Sonal Varma at Nomura Holdings Inc. predict India will recover from Modi’s cash shock by June and demand will rebound after that.

The $2 trillion economy is forecast to grow 7.1% in the year through March, the slowest pace since 2014 but among the fastest in the world. As much as 98% of all consumer payments were in cash, according to a PWC report in 2015.

According to Bloomberg Billionaires Index, India dropped one spot to No. 4 on the Hurun Global Rich List as the nation lost 11 billionaires in 2016 while the world added 69.

Rupert Hoogewerf, chairman and chief researcher at Shanghai-based Hurun Report Inc. stated,”Changes in the list were caused due to a strong U.S. dollar, Brexit, the election of the U.S. President, a surge in the property values of China and India’s demonetization.