Demonetisation push: Digital payments may grow to $470 billion by 2020
A move toward PM Modi's much advocated cashless society could push digital transactions to grow to $470 billion from $190 billion in just 4 years.
With the withdrawal of higher currency, a former cash based society was forced to turn to digital payment methods since the demonetisation announcement on November 8.
Analysts from Morgan Stanley - Parag Gupta, Utkarsh Khandelwal and Gaurav Rateria said, “If India's cash consumer payment activity were to decline to 61% (where China was in 2010), digital payments in India could grow from approximately $ 190 billion in 2015 to nearly $ 470 billion by 2020,” in a report dated December 8.
Cash payments in India in 2015 were nearly 78% as per Euromonitor as compared to 47% in China and only 24% in the US.
Since PM Modi formally announced the demonetisation of Rs 500 and Rs 1,000 notes, the government has also pushed for e-payments through many initiatives in the hopes of moving toward a ‘cashless society.’
Initatives such as removing excise duty on goods for manufacturing POS machines until March 31 2017, waiving service tax on debit/credit card transactions of up to Rs 2,000, discounts on digital payments for petrol and diesel, and railway counters and insurance premiums.
The analysts estimated that the cash share of consumer payments will go down considerably because of this.
This may also prove as a positive for India as cost of cash transactions may also drop considerably.
In an earlier report by Zeebiz in October said ‘cost of cash’ transactions amounted to 1.7% of India’s GDP.
The cost of cash transactions simply stemmed from large volumes of cash flow in the economy relative to its peers across the globe.
Quoting the research conducted by Visa the report said, “India can reduce its cost of cash and save Rs 70,000 crores ($10.4 billion) in the next five years.”