Demonetization in India was probably the boldest step taken by Honorable Prime Minister Narendra Modi in his tenure of 3 years as the PM. November 8, 2016, would always be one of the most significant dates in Indian economy and society given its overwhelming effects on the entire fiscal sector. The revolutionary move was directed to curtail the evils of counterfeit or black money that is chiefly abused to fund terrorists and criminals. Along with banishing the old notes, Modi also gave the call to go cashless and digital with the financial transactions to help to tackle flow of black money.
How getting cashless or digital is supposed to help?
Cash-dependent payments or dealings are not always easily traceable which consequently makes things smoother for black money operations. But cashless transactions through digital payments have proved to be effective in thwarting black money transactions. Digital financial transactions are actually traceable and hence easily taxable- thereby leaving no space for black money circulation.
Thus, cashless economy will benefit the national economy with –
•More transparent financial transactions & money transfers
•Increment of taxation base that will further lower tax avoidance practices
•Curtailing of black economy which largely runs on cash
•Ease of anytime transactions through cards, PayTm and other digital methods. No need to carry wads of cash all the time.
•More efficiency with government’s welfare programs since cashless economy helps on easy transfer of funds to recipients
•Control on fake currency & counterfeiting
•Reduced costs on currency issuance & management
Though the sudden wave of demonetization was overpowering for general Indian life yet the shock seems to have subsided gradually. As per the market reports, digital payment transactions have catapulted to 24 times from November 2016 ($15 million) to March 2017 ($359 million).
BHIM - The National Payment App
The recent surge in cashless/digital transactions is mostly due to a number of measures introduced by the Indian government. One of them is the BHIM for Business. BHIM is the acronym for Bharat Interface for Money. It enables business owners to receive payments from clients in just seconds through the latter’s mobile phone. However, the client has to be a BHIM user as well.
The app was launched in 2016 December by the honorable PM to help with convenient payments through Android phones. As of April 2017, the app has been downloaded by 2 crores+ Indians who regularly use it for everyday payments. BHIM for Merchants is completely free to use and does not charge commission or transaction fee as PayTm does.
Using BHIM is as easy as 1-2-3. The user would have to register with bhim.io and provide his VPA (Virtual Payment Address). If he doesn’t have one, he can ask his bank to setup his VPA free of charge. After the merchant provides his VPA, he will get his QR code. Now, the merchant would just need to print out & post the BHIM QR code near his shop. It should be placed somewhere where customers will have easy access to the code. If the merchant doesn’t have a printer, bhim.io will send him the printed code that he can directly stick on his shop. While making the payment, the customer would simply need to can the shop’s BHIM QR code on his mobile phone. In a few minutes, money would be transferred to the merchant’s bank account directly from the consumer’s bank account.
Demonetization and the nudge to go cashless are being lauded by World Bank as healthy for Indian economy. A fast rising digital payment scenario in the country is expected to leverage the growth of national economy to 7.6 percent in 2018.