Saturday, 11 March 2017

Cashless transactions is a bane for Indians

It is natural for Government departments to expects citizens leave trail of transactions they make for the purpose of efficient tax realizations and crime investigations.

Cashless transactions offers the following advantages to Government and citizenry and results in higher investments in infrastructure and efficient fiscal management of nation.
  • Leaves a long trail of transactions
  • Efficient tracking for effective tax realizations and evasion of taxes
  • Reduces expenses and burden of monetary system management
  • Eliminates risk of carrying cash safely
  • Helps businesses and people manage their financial transactions safely & with ease, efficiently and reduces reckless spending
  • Reduces physical visits to Banks
  • Eliminates black money menace 
  • Reduces corruption
  • Controls money laundering
  • Reduces pick pocketing, robberies and thefts of money

But the disadvantages with Indian perspective are
  • People are used to cash traditionally and over 90% transactions are in cash
  • Unreasonable tax rates, corruption, reckless public spending, bureaucratic apathy & abuse, irresponsible politicians, lack of transparency & accountability in administration, business cheating etc justifies tax evasion and reinforces cash as a secure possession of wealth
  • Need for a bank account, Aadhaar card & PAN Card for every person
  • Requires higher levels of education & banking education
  • Every person must have smart phone & data connection
  • Internet & 3G spread must reach nook & corner of entire country
  • Every transaction entails charges 1-2% apart from Data costs
  • Non cash transaction results in increased tax payments
  • Less secure internet and less secure banking systems exposes risks of hacking and losing money for customers
  • Lack of privacy laws, grievance redress systems, high cost & inaccessible courts poses serious hurdle for acceptance & growth of cashless transaction systems.
Tax evasion, black money menace etc are largely urban phenomenon. Most rural habitants are with earnings that are within no tax or 10% tax bracket. With 90% of country out of internet/mobile map, 40% illiterate, 40% poorer classes, ineffective privacy laws & grievance redress systems, cashless transactions shall remain largely an urban phenomenon for few more decades.

My View:
With very low per capita income, poverty, illiteracy, citizen rights largely unprotected, weak infrastructure, poor privacy laws etc and Government suffering lack of citizen confidence (reflected by Mafia gangs resorting to quick settlements for huge cuts) and unreasonable tax regimes etc cash systems will prevail for few more decades. Modi in order to increase tax revenues resorting to autocratic methods, destroying institutions and unleashing police-raj will only create chaos & confusion and detrimental to stability & growth. Government attempting to force gullible & weak citizenry to adopt cashless systems is not only a bane and is bound to fail.

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