ON THE BRINK OF A NEW REVO­LU­TION

The Economic Times - - Companies: Pursuit Of Profit -

of pay­ment, a noble idea seems to be guid­ing this change, a no­tion of a trans­par­ent econ­omy and a na­tion fo­cused to­wards its growth.

Whether this was the sole in­ten­tion of the de­mon­e­ti­za­tion drive or a side ef­fect, the fact is that the stage has been set for a new age drama — a cash­less econ­omy that is here to stay. Not all of Rs 15.44 lakh crore worth of cur­rency dis­pensed with will be re­mon­e­tized through is­suance of new notes. A ma­jor­ity of this gap is ex­pected to be filled by e-cash.

Elec­tronic card pay­ments have an im­mensely mean­ing­ful im­pact on the world econ­omy. Moody's An­a­lyt­ics pub­lished by Visa states that greater us­age of elec­tronic card pay­ments added $983 bil­lion in real US dol­lars to the GDP of 56 coun­tries they stud­ied from 2008 to 2012. The global GDP grew by an av­er­age of 1.8% dur­ing this time pe­riod. This is also rat­i­fied by the aca­demic school of thought which through Dif­fu­sion of In­no­va­tion The­ory (DOI) states that ef­fec­tive mi­gra­tion to elec­tronic forms of pay­ments would re­sult in over­all eco­nomic growth, con­sump­tion and trade due to trans­parency, ac­count­abil­ity, re­duc­tion in cash re­lated fraud and ease of do­ing busi­ness.

One in­dus­try which is slated to def­i­nitely ben­e­fit in the long run and may al­ready have started reap­ing the re­wards in the short term from de­mon­e­ti­za­tion and the sub­se­quent re­mon­eti­sa­tion is the re­tail in­dus­try. The or­gan­ised re­tail in­dus­try in In­dia con­sists of about 5% of to­tal re­tail mar­ket. The move­ment to­wards a cash­less so­ci­ety is a huge im­pe­tus for or­ga­nized re­tail­ers as de­mand would shift to­wards them. To con­quer the chal­lenges of de­mon­eti­sa­tion, off­line re­tail­ers are en­cour­ag­ing cus­tomers to move away from cash and are pro­vid­ing var­i­ous pay­ment so­lu­tion al­ter­na­tives to avoid pur­chase hin­drances.

A con­clu­sive yet de­fin­i­tive fact that is de­rived from the above is the emerg­ing con­tri­bu­tion of de­mon­e­ti­za­tion to­wards a trans­par­ent and self-re­liant econ­omy well into re­al­is­ing the "Make in In­dia" dream. In­dia's in­for­mal econ­omy roughly con­sti­tutes 45% of the GDP and 80% of em­ploy­ment. The harsh deriva­tion of this fact is that bil­lions are ex­changed ev­ery year with­out the tax col­lec­tor even know­ing about it. This is the ma­jor rea­son as to why only 1% In­dia's pop­u­la­tion pays in­come tax. With de­mon­e­ti­za­tion, higher tax col­lec­tions from bet­ter com­pli­ance would of­fer scope to re­duce tax rates over long term, which would in­crease dis­pos­able in­come. This can give a pos­i­tive im­pact on con­sump­tion de­mand in long term.

Re­mon­e­ti­za­tion in the form of a cash­less econ­omy has paved the way to­wards the cre­ation of an en­vi­ron­ment of trans­parency and par­ity thus en­cour­ag­ing in­dige­nous in­vestors to man­u­fac­ture do­mes­ti­cally. A dig­i­tal econ­omy will pave the way for a real time econ­omy, one where ev­ery trans­ac­tion can be tracked in real time. This will help in­creas­ing the tax net of the coun­try, which in turn will have the po­ten­tial to de­liver un­told ben­e­fits to its own peo­ple.

While on one hand this ini­tia­tive has read­ied the mar­ket for man­u­fac­tur­ers, on the other hand, through in­creased pur­chas­ing power it is pro­vid­ing the de­mand im­pe­tus nec­es­sary to buoy this cam­paign. Make in In­dia's vi­sion of mak­ing In­dia an em­pow­ered so­ci­ety is what is go­ing to make In­dia dig­i­tal econ­omy a 1 tril­lion dol­lar econ­omy in the com­ing five years and it is this ini­tia­tive in pro­mot­ing dig­i­tal pay­ments that is ex­pected to make the or­ga­nized sec­tor reach 20 per cent of the to­tal re­tail in­dus­try in In­dia by 2025.

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