Advantages and Disadvantages of Cashless Economy

This discussion explores the various dimensions of a “cashless economy”, as well as the pros and cons that its widespread adoption might bring to the table. It also emphasizes the efforts that the government needs to do to raise public understanding of technology in order to fight fraud and concealment and promote a sustainable environment for the people.




Unstop Igniters Glim

a year ago | 3 min read


Prime Minister, “Mr.Narendra Modi”, announced the so-called "demonetization drive" on November 8, 2016, shocking the entire nation and distressing everybody from blue-collar workers to the white-collar workers. The Central Government said that starting from November 9, 2016, transactions in Rs.500 and 1000 currency notes will be offensive. Using "credit/debit cards," "ImmediatePayment Service (IMPS)," "National Electronic Funds Transfer(NEFT)," and "Real Time Gross Settlement (RTGS)," all transactions in India were to be performed electronically, with the primary objective of promoting a cashless society. This initiative also encouraged a lifestyle that was more focused on technology and made a big contribution to India's rising literacy rate. The government had also actively worked at several levels to diminish the dependence of the public on cash by developing two programs—"Lucky Grahak Yojana" for citizens and "Digi Dhan Vyapar Yojana" for small businesses—to boost internet banking and e-payments but we must keep in mind that some people in this country still do not have access to a cell phone. They were given access to a payment system based on Aadhar by the Government. The RBI provided licenses to establish contemporary small-finance banks and payment banks in order to offer cutting-edge solutions through intervention. The greatest cash to GDP ratio was highest in India in 2016 owing to a value of “0.124”. China had 0.95 while Brazil had 0.004. Additionally, there were much more currency notes in circulation than in other large economies. According to research, “India used 76.47 billion currency notes in 2012–2013 compared to 34.5 billion in the US”.


As most of the black money is used to artificially inflate real estate prices, going cashless will first help destroy black money, which will have an impact on the values of the real estate. According to a poll, 1 in 8 notes now in use are fake, which will have a serious negative effect on the country’s economy. By doing away with cash, we would be able to track every transaction we make, resulting in more transparency in both business dealings and online monetary transactions. To add cherry on top, it will lead to a marked reduction in the widespread fraud and money laundering that is currently prevailing in the society.

The cost of banking services will be reduced, and there will be less tax avoidance, which is the next way it will be beneficial. Not to mention, becoming cashless will assist the RBI's monetary policy committee in reducing inflation and accelerating the country's growth rate, which will reduce the trade imbalance and the Current Account Deficit (CAD) with other countries.


Even though we regularly talk about the cashless economy, we must remember that a very big percentage of India's population (almost 70%) lives in rural areas. Many people in this group still lack access to online banking, are unable to use credit ordebit cards, and in some cases may not even own smartphones.

80% of the people (mainly blue-collar workers) in the manufacturing and agricultural sectors,which produce half of the country's goods, come from rural areas, making the shift to a cashless society extremely difficult. Despite the fact that there have been a lot more cashless transactions, especially since the COVID-19, several elements, including as government intervention and technical improvements needs to be given high importance if we are to completely eliminate cash.

People who live in Tier-1 cities may have trouble making online payments due to poor connectivity. Therefore, even though there are numerous advantages, we still need to overcome challenges in order to advance towards a cashless society.


India might benefit from going cashless in its fight against “terrorism, corruption, and money laundering”, but it would also lead to an increase in one serious problem i.e., cyberfraud. Therefore, it is the responsibility of the government to enhance the Internet Security System. The government may propose the following remedies: granting licenses to payment banks, promoting mobile wallets, getting rid of card service fees, and doing away with platform fees for “UPI payment apps like Phonepe and Paytm”. The Government should regularly perform a training programme to inform the people about the benefits of online transactions as technology innovates.


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