Digital India: How far did Demonetization help?

Submitted in partial fulfillment of the requirements

For the award of the degree of

Bachelor of Commerce B.Com (H)

Guru Gobind Singh Indraprastha University, Delhi

Guide: Submitted by:

MS. Megha Aggarwal Prateek Sharma

RollNo:02124488818

Institute of Innovation in Technology & Management,

New Delhi – 110058
Batch (2018-2021)

1
 Certificate

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certify that the Minor Project Dissertation (BCOM-112) entitled “Digital India: How far

did Demonetization help ” is done by me and it is an authentic work carried out by me.

The matter embodied in this project work has not been submitted earlier for the award of any

degree or diploma to the best of my knowledge and belief.

Signature of the Student:

Date:

Certified that the Minor Project Report/Dissertation (BCOM-112) entitled

“___________

_______________________” done by Mr_______________________________, Roll

No. ________________, is completed under my guidance.

Countersigned

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2
 INDEX

Chapter no. Topic Page no.

Digital India

Chapter -1 1. Digital Services. 5-11

2. Need for Digital Economy.
3. Advantages to Indian Economy.

Objectives of project .
Research methology.

Measures taken to promote Digital India.

Chapter -2 Demonetization.

1. Positive impacts of Indian Economy.

2. Merits of Demonetization.
3. Demerits of Demonetization.
4. Transforming india to a cashless economy. 12-41
5. Reasons behind Demonetization.
6. Failures of Demonetization.
7. RBI’s report on Demonetization.
8. Concept of Digital Payments

Conclusion
Chapter -3
How Demonetization pushed Digitalisation 42- 47
in india.

3
4
 Chapter -1

Introduction

DIGITAL INDIA : HOW FAR DID DEMONETIZATION HELP.

What is Digital India

Digital India is a campaign launched by the Government of India to ensure the

Government's services are made available to citizens electronically by improved online

infrastructure and by increasing Internet connectivity or by making the country digitally

empowered in the field of technology.

Prime Minister(s): Narendra modi

Launched: 1 July 2015; 3 years ago

Ministry: Ministry of Electronics and Information ...

Key people: Ravi Sankar Prasad, S. S. Ahluwalia

5
Digital Services

 eSign framework allows citizens to digitally sign a document online using

Aadhaar authentication.

 Swachh Bharat Mission (SBM) Mobile app is being used by people and

Government organisations for achieving the goals of Swachh Bharat Mission.

 eHospital application provides important services such as online registration,

payment of fees and appointment, online diagnostic reports, enquiring availability

of blood online etc.

 Digital attendance: attendance.gov.in was launched by PM Narendra Modi on 1

July 2015 to keep a record of the attendance of government employees on a real-

time basis. This initiative started with implementation of a common Biometric

Attendance System (BAS) in the central government offices located in Delhi.

 Back-end digitization

Need For The Digital Economy

Digital economy is one collective term for all economic transactions that occur on the internet.

It is also known as the Web Economy or the Internet Economy. With the advent of technology

and the process of globalization, the digital and traditional economies are merging into one.

Let us learn more about this concept of digital economy.

6
1. Promotes Use of the Internet

If you think about it, most of your daily work can today be done on the internet. The

massive growth of technology and the internet that began in the USA is now a worldwide

network. So there is a dramatic rise in the investment on all things related – hardware,

technological research, software, services, digital communication etc. And so this economy

has ensured that the internet is here to stay and so are web-based businesses.

2. Rise in E-Commerce

The businesses that adapted and adopted the internet and embraced online business in the

last decade have flourished. The digital economy has pushed the e-commerce sector into

overdrive. Not just direct selling but buying, distribution, marketing, creating, selling have

all become easier due to the digital economy.

3. Digital Goods and Services

Gone are the days of Movie DVD and Music CD’s or records. Now, these

goods are available to us digitally. There is no need for any tangible products

anymore. Same is true for services like banking, insurance etc. There is no

need to visit your bank if you can do every transaction online. So certain goods

and services have been completely digitized in this digital economy.

7
4. Transparency

Most transactions and their payment in the digital economy happen online.

Cash transactions are becoming rare. This helps reduce the black money and

corruption in the market and make the economy more transparent. In fact,

during the demonetization, the government made a push for online

transactions to promote the web economy.

Advantages to Indian Economy from Digital India

 The creation of digital infrastructure

 Delivering services digitally

 Digital Literacy

1. Creation of Digital Infrastructure and Electronic Manufacturing in Native India.

2. Digital Empowerment of Native Indian People.

3. Delivery of all Government Services electronically (E-Governance).

4. A Digital Identification which will verify the end user.

5. A Mobile for worldwide access to all services.

6. A Bank account for Immediate Benefit Transfers of subsidies and payments.

7. The program also aims to eliminate all electronics imports from foreign

countries by 2020 and make India a electronics manufacturing super power.

8
Other Advantages :

 It will help in decreasing crime if applied on whole.

 It will help in getting things done easily.

 It will help in decreasing documentation.

 Some of the services which will be provided through this desire effort are

Digital Locker, e-education, e-health, e-sign and nationwide scholarship portal.

 It will ostensibly create a lot of jobs.

 It will be a boost to industry; both large and small enterprises.

Objectives of project

1. To get to know about the Digital India programme and Demonetization.

2. To realize about Demonetization and its impact Digital India.

3. To aware about role, importance of Digital transactions.

9
RESEACH METHOLOGY

WHAT IS SECONDARY DATA ?

Secondary data refers to data which is collected by someone who is someone other than

the user. Common sources of secondary data for social science include censuses,

information collected by government departments, organizational records and data that

was originally collected for other research purposes. Primary data, by contrast, are

collected by the investigator conducting the research.

Secondary data analysis can save time that would otherwise be spent collecting data and,

particularly in the case of quantitative data, can provide larger and higher-

quality databases that would be unfeasible for any individual researcher to collect on their

own. In addition, analysts of social and economic change consider secondary data

essential, since it is impossible to conduct a new survey that can adequately capture past

change and/or developments. However, secondary data analysis can be less useful in

marketing research, as data may be outdated or inaccurate.

SOURCES OF COLLECTING SECONDARY DATA

1. Websites
2. Books
3. Magazines
4. Other sources like reading some survey.

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 Chapter -2

Data presentation and Analysis

Measures taken to promote Digital Economy in India

1. Promoting digital payments

The government will launch two new schemes to promote the usage of BHIM (Bharat

Interface for Money) app for digital payments, namely the Referral Bonus Scheme for

individuals and a Cashback Scheme for merchants. The government might also take steps

to promote and possibly mandate petrol pumps, fertilizer depots, municipalities, Block

offices, road transport offices, universities, colleges, hospitals and other institutions to

have facilities for digital payments, including the BHIM App. A proposal to mandate all

Government receipts through digital means, beyond a prescribed limit, is under

consideration.

2. Internet access

The budget allocated INR 100 billion (USD 1.5 billion) to the BharatNet Project for

2017-18, targeting high speed broadband connectivity on optical fibre in more than

1,50,000 villages by the end of the year. A DigiGaon (Digital Village) initiative will be

launched to provide tele-medicine, education and skills through digital technology.

3. Health and education

The government plans to launch the SWAYAM e-learning platform with at least 350

online courses. This would enable students to virtually attend the courses taught by

11
chosen faculty, access high quality reading resources, participate in discussion forums,

take tests and earn academic grades. Access to SWAYAM would be widened by linkage

with DTH (Direct to Home) TV channels, dedicated to education.

Demonetization in india

On 8 November 2016, the Government of India announced the demonetisation of

all ₹500 and ₹1000 banknotes of the Mahatma Gandhi Series. It also announced the

issuance of new ₹500 and ₹2000 banknotes in exchange for the demonetised banknotes.

The government claimed that the action would curtail the shadow economy and reduce

the use of illicit and counterfeit cash to fund illegal activity and terrorism.

The announcement of demonetisation was followed by prolonged cash shortages in the

weeks that followed, which created significant disruption throughout the

economy. People seeking to exchange their banknotes had to stand in lengthy queues, and

several deaths were linked to the rush to exchange cash.

According to a 2018 report from the Reserve Bank of India, approximately 99.3% of the

demonetised banknotes, or ₹15.30 lakh crore (15.3 trillion) of the ₹15.41 lakh crore that

had been demonetised, were deposited with the banking system. The banknotes that were

not deposited were only worth ₹10,720 crore (107.2 billion), leading analysts to state that

the effort had failed to remove black money from the economy. The BSE

SENSEX and NIFTY 50 stock indices fell over 6 percent on the day after the

announcement. The move reduced the country's industrial production and its GDP growth

rate.

12
Demonetization: Positive Impacts on Indian Economy Claimed

Economic Survey after careful review of Demonetization which was announced one and

a half year back, has found that the cash-to-GDP ratio has stabilized. It suggests a return

to equilibrium:

 The Economic Survey says that India's GDP is set to grow at 7 to 7.5 percent in

2018-19. This is an increase from its prediction of 6.75 percent growth this fiscal

year.

 The Economic Survey has cited exports and imports data to claim that the

demonetisation effect was now over. It claims that re-acceleration of export

growth to 13.6 percent in the third quarter of Financial Year 2018 and deceleration

of import growth to 13.1 percent is in line with global trends. This suggests that

the demonetization and GST effects are receding. Services export and private

remittances are also rebounding

 According to the statistics released in the Survey, the Demonetization had led to

Rs 2.8 lakh crores less cash (Equivalent to 1.8% of GDP) and Rs 3.8 lakh crores

less high denomination notes (Equivalent to 2.5% of GDP) in the Indian economy.

 The Economic Survey has also clarified that income tax collections have touched

new high with demonetization and introduction of GST, “From about 2 percent of

13
 GDP between 2013-14 and 2015-16, they are likely to rise to 2.3 percent of GDP

in 2017-18, a historic high.”

Merits-Demonetization Favoured India’s Economic Growth

 Demonetization policy of the Government has been termed as the greatest

financial reform that aimed to curb the black money, corruption and counterfeit

currency notes.

 All the people who are not involved in malpractices welcomed the demonetization

as the right move.

 Demonetization was done to help India to become corruption-free as it will be

difficult now to keep the unaccounted cash.

 Demonetization will help the government to track the black money and the

unaccounted cash will now flow no more and the amount collected by means of

tax can be better utilized for the public welfare and development schemes.

 One of the biggest achievements of demonetization has been seen in the drastic

curb of terrorist activities as it has stopped the funding the terrorism which used to

get a boost due to inflow of unaccounted cash and fake currency in large volume.

 Money laundering will eventually come to halt as the activity can easily be

tracked and the money can be seized by the authorities.

 Demonetization aimed to stop the running of parallel economy due to circulation

of fake currency as the banning of Rs.500 and Rs. 1000 notes will eliminate their

circulation.

 The unaccounted cash could be deposited in the Pradhan Mantri Garib Kalyan

Yojana after paying 50% tax. The money will remain deposited for 4 years with

14
 the bank without incurring any interest. However, after 4 years the amount will be

returned. This amount can be utilized for social welfare schemes and making the

life of low income groups better.

 The Public Sector Banks which were reeling under deposit crunch and were

running short of funds have suddenly swelled with lot of money which can be

used for future finances and loans after keeping a certain amount of reserve as per

RBI guidelines.

 The people who opened the Jan Dhan accounts will now use their accounts and

become familiar with banking activitiy. The money deposited in these accounts

can be used for the developmental activity of the country.

 The tax collected due to launch of demonetization policy will be put to

developmental activities in the country.

 Demonetization has driven the country towards a cashless society. Lakhs of the

people even in remote rural areas have started resorting to use the cashless

transactions. The move has promoted banking activities. Now even the small

transactions have started going through banking channels and the small savings

have turned into a huge national asset.

 The high rising price pattern and inflationary trends which the Indian economy

was facing are taking a down turn making the living possible within low income

group reach.

15
Demerits-Blow to economic growth and inconvenience all around

The very next day of announcing the demonetization, the BSE Sensex and NIFTY

50 stock indices fell over 6%. The severe cash shortages brought detrimental impact

on the economy. People trying to exchange their bank notes had to stand in lengthy

queues causing many deaths due to inconvenience and rush.

 The sudden announcement has made adverse impact on business and economy.

Instead of a growing economy India has become a standstill and no growth

economy. It is fearedthat a fall of 2-3% in the GDP growth will be recorded

coming year.

 India is an agriculture based economy. Due to the cash crunch, the farmers

especially small and marginal who largely depend on cash to buy seeds, fertilizers

and to pay for sowing, borrowing water for irrigation and for other related

agriculture equipments remained worst affected and could not complete the crop

related activity.

 Since small branches of the banks were also not supplied with adequate cash

within time of sowing season of the crop, farmers could not get their crop loans

disbursed. This added to the woes of the farmers leading to a weak agriculture

production the coming year.

 Real Estate sector came to a stand still and is still gasping for buyers of the

constructed and half constructed inventory without buyers. This has resulted in

poor cash flow leading to a poor demand.

 Demonetization has made the situation become chaotic. Tempers are running high

among the masses as there is a delay in the circulation of new currency.

16
 Due to the inability to pay cash to poor daily wage workers, the small employers

have stopped their business activity.

 The poor planning on the part of the government has also added to the woes of the

common people with low incomes. The Rs.2000 currency note does not find

many takers as it is difficult to get the balance back when you are buying daily

needs like vegetables, milk, bread or paying for petty expenses like bus fare.

While rs.100 currency notes were not available in sufficient number, Rs.500 note

arrived in the market very late.

 Demonetization is the 2 way sword in regard to incurring the public expenditure.

On the one hand huge cost is to be incurred on printing the new currency and on

the other hand managing the lakhs of crores of old currency volume has also

become a big expenditure incurring item.

 Many Economists are of the view that Rs.2000 currency note will be much easier

to hide and can be used to store black money in shorter space.

 Entire opposition has stood against demonetization and has called this decision a

draconian law.

17
Demonetization in transforming to a cashless economy

 Yes, there has been notable improvement in the digital transactions across

segments in last seven months. The question is how to define this spike — a

revolution brought about by Prime Minister Narendra Modi’s demonetisation and

the government’s digital push or something that would have happened anyway in

the financial system even without a shock therapy?

 A primary assessment of the trend in various segments shows that the

demonetisation of Rs 500 and Rs 1,000 notes has certainly caused a spike in

digital transactions in the immediate months (December 2016 in particular), as

people rushed to alternative channels to do transactions in the wake of a sudden

cash crunch and some are sticking to those channels. However, the level of usage

of these channels hasn’t stayed at the peak levels seen in the subsequent months

of the demonetisation.

 To be sure, these digital payments channels have still shown a healthy growth

trend but volumes have declined while value has more or less retained pace,

which means less number of people are using it. The only exception to this trend

is UPI transactions, where there has been an exponential growth — mainly on

account of a low base. Post the initial bump, the trend is beginning to stabilise,

albeit, on a lower side. This is still an encouraging trend and more clues are still

emerging.

 According to the RBI data, the volume of debit card usage (perhaps the most

popular non-cash instrument for common man to make payments) spiked to 415

18
 million in December last year from just 236 million in the previous month when

the demonetisation was announced. The value of transactions jumped from Rs

32,200 crore to Rs 58,000 crore in just one month. But, in the months after that

the volume decline to 328 million and value to Rs 49,000 crore. In May this year,

the volumes have declined from the December peak to 267 million and value to

Rs 37,500 crore. So, between November to May, the increase in volume is 13

percent and value 16 percent.

 Though not part of the digital family, cheque transactions — another preferred

mode for transactions for a good number of Indians — rose to 130 million in

volume and Rs 6.8 lakh crore in value in December from 87 million and Rs 5.4

lakh crore in November. But, in May this year, the volume and value stood at 97

million and Rs 6.7 lakh crore.

 The volume trend shows that more people opted for non-cash modes when cash-

shortage was at its peak, even for small transactions. Post this, a part of this group

has continued to use non-cash instruments while others returned to good old cash.

But such improvement has not shown any dramatic rise as seen across channels

such as NACH/NEFT and PPI (see the table), if one looks at the November-May

period.

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 TABLE NO.1

Digital payment transactions in Rs billion

System Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17

RTGS 101894 110980 100603 95267 154095 111744 113313

Cheque 5419 6812 6618 5994 8063 6991 6746

Truncation

System (CTS)

EFT/NEFT 8808 11538 11355 10878 16295 12156 12411

Immediate 325 432 491 482 565 562 586

Payment Service

(IMPS)

National 607 627 541 654 899 972 761

Automated

Clearing House

(NACH)

Credit card usage 266 311 327 287 334 331 361

at POS

Debit card usage 322 580 490 358 357 375 375

at POS

Prepaid Payment 51 98 110 96 107 104 107

Instruments

(PPIs)

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Mobile wallet 33 74 84 69 73 74 72

PPI cards 15 21 24 25 31 27 33

Mobile banking 1366 1498 1383 1280 1731 1612 2133

Total 119105 132972 122027 115390 182549 134948 136897

Source: RBI

Bulletin

The big exception has been UPI that allows customer to transact between different bank

accounts through same application installed on their mobile phone. Here, the volume has

grown to 10 million transactions in June against 2 million in December with value

jumping from Rs 706 crore to Rs 3,067 crore. Trends on digital transactions have begun

to stabilise but a clearer picture will emerge only say after a period of one year when cash

situations turn normal completely and small businesses come back to normalcy

recovering from the note ban impact.

No doubt — there is a growth in India’s digital journey and in all fairness, the

demonetisation has done its part. But, the growth has not been something that should be

over-hyped in the context of the demonetisation. This is a mistake some analysts are

committing. A recent report from SBI economists said India has leapfrogged three years

of digitisation in just seven

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Reasons behind demonetization in India

1. Rate of Inflation goes down

Prices of commonly consumed commodities like Pulses, fruits, vegetables had gone

down substantially post demonetization. Accordingly it brought down the rate of inflation

during the months that followed demonetization. The chart below represents the impact

of demonization on the commodities

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2. India moves to cashless economy

One of the key effects of Demonetization 2016 has been that more people have made

digital payments part of their lives moving towards a cashless economy. The details of

growth of such digital transactions since January 2016 to August 2017 reflect that NEFT

transactions that involved Rs. 7086 bn increased to Rs.12500 bn; Debit cards transactions

increased from Rs.2328 bn to Rs. 2700 bn; credit cards from Rs. 214 bn to Rs.366bn and

the IMPS transaction which was not used by the people, got a share of Rs.651 bn. The

Data shared by Reserve Bank of India reflect the trend:

23
3 Stock Market gets bullish

After demonetization stock market in India got bullish. While BSE index which was 27,

459 on November 7, 2016 rose to 33680.92 on November 6, 2017, the NSE rose from

8497 to 10,443. The data shared by Bloomberg reflect the trend.

24
4 Banks lending increases for small businesses

Banks’ finance to small business was going down in pre-demonetization period. There

was a negative growth even in short period of months. As on November 25, 2016, a

negative growth of -7.71% was recorded in Banks’ lending to small business. It went to -

8.16% as on December 23, 2016. However, as on September 29, 2017 the Reserve Bank

of India has reported a positive growth of 1.65% in lending to small business by the

Banks.

25
Failures of Demonetization

1 Economic Growth slows down

Post demonetization growth of Indian Economy slowed down from 9.1% to 5.7% in less

than one year. Month-wise GDP growth chart for the period March 2016 to September

2017 as shared by Bloomberg emphasizes this fact as detailed below:

26
2 Realty sector bears the brunt

The triple decisions of demonetisation, RERA and GST resulted in a deceleration of new

property launches. The supply of new housing units in the top-6 cities in India during the

first three quarters of 2017 was down by around 60 per cent, compared with the

corresponding period of 2016.

With respect to property sales, the secondary market was obviously highly susceptible to

demonetisation as compared to the primary market. Property transactions in the

secondary sales and luxury housing segments tended to have significant cash

components, and such sales have been hampered significantly due to demonetization.

27
RBI’S REPORT ON DEMONETIZATION FAILURES
 The Reserve Bank of India’s second annual report since demonetisation puts to

rest any illusions about the Modi government’s grandest financial gesture. On

November 8, 2016, Prime Minister Narendra Modi announced that all Rs 500 and

Rs 1000 notes, comprising 86% of the total value of the currency in circulation at

that time, would no longer be recognised as legal tender. Nearly two years later,

the central bank says, about 99.3% of the notes sucked out of circulation has been

returned. Besides, the value of bank notes in circulation has increased by 37.7%

over the year, reaching Rs 18,037 lakh crore by the end of March 2018. It is

perhaps no surprise, then, that Bharatiya Janata Party legislators who are part of

the Parliamentary standing committee on finance have reportedly stalled the

adoption of a draft report on demonetisation.

 Demonetisation was supposed to be the tonic that cured the financial system of a

range of maladies, the government argued. Yet, over the last two years, at least

three of its major claims have collapsed. It was supposed to flush out black money

and end corruption. The government predicted that Rs 3 lakh crore in currency

would not return to the banks. This has proved to be false, as most of the cash has

returned. Either the black money was parked in other assets or is yet to be

identified as such from the amounts deposited in various banks across India.

Meanwhile, the country’s banks reportedly detected a 480% jump in suspicious

transactions post demonetisation.

28
 Second, demonetisation was to help detect fake currency, which apparently

funded terror and distorted the economy. The government claimed that at any

point of time, there was Rs 400 crore in fake currency notes floating in the

economy. Nine months after demonetisation, it was claimed that Rs 11.23 crore in

fake currency had been detected. Now, the Reserve Bank reports a huge jump in

fake Rs 2,000 notes, which were introduced after demonetisation.

 Third, demonetisation was to pave the way to a cashless economy and the

gleaming new world of digital India. Two years later, the amount of cash with the

public has reached a record high, the bank has claimed.

 Initially, the BJP spun it well, as the great “surgical strike” on black money, the

bold move that would punish the corrupt rich and eventually bring redistributive

justice. It tapped into deep wellsprings of anger created by entrenched inequality

and it showed the Modi government to be waging war on corruption. But the

liquidity crunch led to months of hardship and job losses for thousands, including

the poorest of the poor who depend on cash for their daily lives and livelihoods.

According to the Opposition, the decision also brought down growth by 1.5%. In

the face of mounting evidence against it, the Centre chooses to say

demonetisation has met its objectives. But why, then, are BJP legislators

anxious to stall the adoption of the draft report of the Parliamentary Standing

Committee on Finance, which had said that demonetisation led to at least one

percentage point of lost Gross Domestic Product growth, as well as

unemployment due to the cash crunch.

29
How demonetisation has pushed India towards a digital economy

 The demonetisation drive has forced millions of Indians to not just queue up at

ATMs but also fall in line with the Narendra Modi government's digital push,

even as online payment services firms are laughing all the way to the bank.

 The demonetisation drive has forced millions of Indians to not just queue up at

ATMs but also fall in line with the Narendra Modi government's digital push,

even as online payment services firms are laughing all the way to the bank.

 In a nation where most consumers have hitherto been dealing in cash, the

currency switch has provided the Centre an opportunity to give a big push to

electronic transactions to improve transparency and weed out black money.

 At present, digital payments account for 15 per cent of the $1.5 trillion worth of

consumer spending in this country. This could rise to 60-70 per cent of overall

consumer spending in the next two years, said Mrinal Sinha, operations head at e-

wallet company MobiKwik. The scope appears to be reflected in the sudden surge

in transactions of e-wallet companies such as Paytm, MobiKwik and FreeCharge

 The government expects the move to pay off as cash-starved consumers are taking

the plunge to cross the psychological barrier of switching to digital transactions

with which they were uncomfortable until now.

 A senior Finance ministry official told MAIL TODAY that with more

transactions coming online there will be greater transparency, which will make it

possible to ensure a higher degree of tax compliance. Mobile payments and

commerce platform Paytm claimed it crossed seven million transactions worth Rs

120 crore on November 22.

30
 The immediate impact of demonetisation is visible in the national Capital where

even small traders took to digital modes of payment including e-wallets. Tea

sellers, vegetable vendors and neighbourhood grocery stores started accepting

money through e-wallets after the government banned Rs 500 and Rs 1,000 notes,

sweeping away 86 per cent of India's total currency in circulation.

 Tea and vegetable sellers in most parts of the city began transaction through

digital wallets while the parking lot operators particularly in malls too accepted

payments through cards of e-wallets. Similarly, patients had the option of paying

doctors' fee through e-wallets at many private clinics and hospitals.

 Even as the ruling AAP in Delhi went all guns blazing against the demonetisation

move, auto-rickshaw drivers, a key vote bank of the party, supported the ban.

Several auto rickshaw unions in Delhi took out march in support of

demonetisation. They said with App-based taxi services going cashless, fewer

people opted for auto rickshaws.

 The consumer class too appeared happy with the currency ban as they saw prices

of commodities like pulses, edible oil, fruits and vegetables coming down in retail

market. "The apple which was selling at Rs 180 per kg till the first week of

November is easily available at prices as low as Rs 120 per kg. Similarly, cash

crunch has resulted in low demand as hence prices of vegetables too have come

down," said a trader at Gazipur mandi.

 Paytm with its latest app update on Wednesday announced a feature for small and

medium businesses to accept payments from consumers using all bank's

31
 debit/credit cards and UPI apps. This is expected to further accelerate the pace of

digital transactions.

 MobiKwik claims a five-fold growth in downloads of its smartphone app and a

20-time growth in usage of its platform this month.

 FreeCharge has seen wallet load transactions grow eight times and a nine-fold

growth in consumer transactions. The government, on its part, has asked banks to

install 10 lakh additional point of sale (PoS) terminals within four months to give

a fillip to digital transactions across the country Banks have placed orders for 6

lakh PoS machines and another 4 lakh are likely to be ordered in the next few

days.

 There are about 15 lakh PoS terminals currently across different merchants to

facilitate card based payments. As part of the plan to expand the digital payments

ecosystem and facilitate the move towards cashless transactions, the government

has decided that an additional one million new PoS terminals should be installed

by March 31.

 The RBI has made it easier for users to use their credit / debit cards for online

transactions below Rs 2000 without second authentication. "This will improve

success rate of online transactions, which will grow both online commerce and

cashless payments in India," said Govind Rajan, CEO of FreeCharge.

32
How Demonetization keeps digital payments up

 In the year after demonetisation, digital transactions have grown considerably.

Indeed, disruptions in the digital space have not only revolutionised the way we

manage our finances, they have also made contactless and cashless transactions

the preferred choice of many among us. And, with digital wallets, quick response

(QR) codes, near field communication (NFC) technology, sound wave systems,

virtual cards, unified payment interface (UPI) and Aadhaar Pay offering top-notch

secure payments options, the smartphone has become the most sought after all-in-

one device.

 Digital wallets and credit/debit cards have been the alternative to cash after

demonetisation to cope with the cash crunch. "There was a surge right after

demonetisation. After cash circulation was back in the market the peak has come

down but the numbers are almost 35 per cent higher than what it was pre-

demonetisation" says Praveen Dhabhai, COO of Payworld. A lot of people use

wallets on a daily basis for a wide range of services including online recharges,

utility payments, travel bookings and movie ticket among others.

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Advantage of using digital payments

Low cost: The government and companies have been promoting digital payments by

offering lower cost. For example, HDFC Bank has recently waived of charges on online

transactions through RTGS and NEFT. Similarly, you do not need to pay service tax on

card transactions up to Rs 2,000.

Saves time: Transfer of money between virtual accounts usually takes lesser time than

wire transfer or a postal one, which may take may take several days. It is also better than

standing in queues or in lines at a bank or post office.

Convenience: The biggest motivator for digital transactions is the ease of doing these

transactions. With proper access to internet, financial transactions can be performed

anytime and anywhere which attracts people to this segment. These transactions can be

performed from anywhere without the need to be physically present there.

Low risk: Using digital wallet reduces the risk of losing your physical wallet or it getting

stolen. Online fraud in cyberspace also exists but with proper measures e-currency is

secure.

User-friendly: The government and the wallet companies have been working on their

services and they have come up with much better and user friendly apps. There is also

24/7 support team to help and deal with any queries.

Controlling expenses: It is also said to be controlling your expenses as you can

automatically keep track of expenses. These accounts contain the history of all

transactions representing the money that has been spent which can be checked anytime.

Controlled expenses result into higher investing, suggest experts.

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Discounts: In the initial days of demonetisation, the wallet companies lured customers

with attractive offers and discounts which have visibly come down in the current times.

Online websites and portals linked themselves with the mobile wallets and heavy offers

and discounts were given by them. Still, getting those offers and discounts is one of the

reasons of the growing popularity of online and digital transactions.

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The future of digital payments
 Demonetisation has given the much required push to digital transactions. But

there is still a long way to go for the digital payment system to become

mainstream. With the government pushing for it and increased adoption by

consumers, companies and experts are hopeful that it will continue to rise in the

future. "We (Indian economy) are in a transition phase, digital mode of payments

and cash will continue to co-exist, and presumably, even flourish simultaneously

moving India towards becoming a 'less-cash' economy" says, Ravi B Goyal,

Chairman & MD, AGS Transact Technologies.

 "The push to get the unbanked on a banking platform is the key first step. On top

of that, the penetration of cheaper data services provides the right conditions for

digital payments to explode soon" says, Brijraj Vaghani, Founder and CEO, Ridlr,

an app for cashless transportation. After demonetisation a lot of new wallets were

launched and the existing ones in the market have been performing exceptionally

well. "Going forward, we will play a key role in bringing millions of small

merchants to the formal financial ecosystem, and make wealth management and

financial services accessible to them. We believe this is a great opportunity for us

to offer financial services and contribute to the growth of our country" adds

Paytm's Vasireddy.

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37
Has Demonetisation Pushed Digitalisation in India?

India experienced its third episodea of demonetisation in November 2016,when high

valued denomination notes of Rs. 500 and Rs. 1000 were withdrawn at a single stroke

which extinguished about 86 percent of the total currency value in circulation. Though

the act of demonetisation was not unprecedented in its own history, the way it was

executed took many by surprise and drew widespread criticisms both from academia and

public. Demonetisation which aimed to curb black money, terror funding and

counterfeiting at the first place, was later projected as the government’s push for

digitalisation drive. Ever since then, the earlier objectives have taken a backseat and

pushing India towards a cashless economy seems to be the prime objective. It was

presented as a panacea and claimed that move towards cashless economy will address the

problems of unequal exchange. The government seems to make people believe that

demonetisation is the magic wand to push the economy to a cashless society. In this act

of haste, the government even seems to have forgotten

about the necessary infrastructure needed to realise the ‘dream’ of a cashless society and

also about the cash dependent nature of the people. According to the World Bank Global

Findex Data, in India, a meagre 4 percent of the total wage recipients (aged 15 years and

above) reported using a bank account to receive wages in 2014. The share was even

lower for rural areas at 2.96 percent. Among the poorest 40 percent of the households,

only 1.7 percent of the adults reported the use of an account to receive wages in the

previous year. These figures clearly suggest that cashless payment constitute only a

minuscule share of the total transactions in the Indian economy. Post-demonetisation, the

government and the Reserve Bank of India seem to promote the use of digital payments.

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There are mainly five modes of transactions that are increasingly being promoted. These

are Unified Payment Interface (UPI), Unstructured Supplementary Service Data (USSD),

Aadhaar Enabled Payment System (AEPS), mobile wallets and debit cards. Amongst

these modes, UPI, USSD and AEPS are introduced and implemented exclusively by the

government. However, the growth of

digital payments remains confined to a small section of the society1,31. The digital

methods of payments have seen a drastic increase over the past few years. This is further

strengthened by the financial inclusion drive and growing popularity of debit cards. The

already growing trend of rising digital transactions was further necessitated when the

move to extinguish 86 percent of the total currency value in circulation was announced.

One year down the line, it is high time to analyse the effects of demonetisation in

enhancing the digital transactions in the economy. The Study seeks to examine whether

the impact of demonetisation was a one-time change or of permanent nature.

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 Chapter-3

Summary and Conclusion

The digitalisation drive which was pushed by the government after demonetisation has

been subject to debate. Earlier studies have asserted that demonetisation will improve

digital transactions of the economy in the long run while many economists were

apprehensive of pushing the economy for digitalisation without sufficient infrastructure.

The present study finds that while the usage of cards for transactions as a percentage of

total transactions has increased, the share of point of sale transactions (PoS) and mobile

transactions has registered a decline after demonetisation. The results also indicate a

faster growth in the percentage share of ATM transactions value while IMPS

transactions, as a percentage of total transactions value, have exhibited a marginal rise.

Demonetisation appears to have had a negative net unfavourable impact on digitalisation.

This should be examined along with strong promotion by both the government and RBI

for a move towards a cashless economy. Low digitalisation in percentage terms might be

on account of an economy being ‘unripe’ to move towards a cashless society due to

infrastructural impediments and habit persistence. The results of the Study call for strong

government intervention in the form of better infrastructure to promote digital

transactions, as lack of necessary infrastructure is a prime reason for lower digitalisation

with regard to payment instruments. The Study also argues for a supportive role from the

government to help the economy traverse to a world of digital payments. This can be in

the form of incentives to use digital transactions like a waiver of service charge or

cashbacks which will act as a nudge to move to digital payments unlike the restriction on

cash transactions that force people to switch to digital transactions. Other important areas

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where government intervention is pertinent are financial literacy and financial inclusion.

The Study asserts that demonetisation has not helped much in pushing digital payments

in India and suggests further improvements in infrastructure and policy environment for

the promotion of digital transactions rather than adopting hasty reform measures like

demonetization.

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 BIBLIOGRAPHY

The information and research carried out in this project were based on secondary data and

were collected from the below mentioned :

 www.economictimes.indiatimes.com

 www.businesstoday.com

 www.livemint.com

 www.americanexpress.com

 www.thehindubusinessline.com

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