Has demonetisation helped India become a less-cash economy?

Key Highlights: 

• RBI's annual report says 99% demonetised cash back in the system
• Electronic payment stood at Rs 107.48 lakh crore in July 2017
• Digital payments in India recorded 55% growth during FY17

The Reserve Bank of India's (RBI) annual report 2016-17 stated that nearly 99% of the demonetised high denomination bank notes namely old Rs 500 and Rs 1000 have been brought back to system.

Finance Minister Arun Jaitley on RBI's annual report said, “Nearly how much money comes back to the system and how much does not, that was never the real object of demonetisation.”

Demonetisation, which took place on November 08, 2016, was inked with several objectives. They were- flushing out black money, eliminate Fake Indian Currency Notes (FICN), to strike at the root of financing of terrorism and left wing extremism, to convert non-formal economy into a formal economy to expand tax base and employment and to give a big boost to digitalisation of payments to make India a less cash economy.

Jaitley stated that India is pre-dominantly high cash economy and that scenario needed to be altered towards less-cash economy. 

There have been various measures taken by both the Government of India and RBI to bring down the cost of digital transactions in order to push people in operating as cash-less economy. 

So has demonetisation's push towards digitalisation worked? 

Although performance of electronic payment system in India has been volatile; it has definitely risen post demonetisation. 

As per RBI, there are ten digital payment mode – RTGS, NEFT, CTS, IMPS, NACH, UPI, USSD, Debit and Credit cards usage at Point of Sale (PoS) and mobile banking. 

Data compiled by RBI showed that total electronic payment system which stood at 67.15 crore in volume, reached to a whopping 95.75 crore in December 2016 (end of demonetisation move), further to 89.69 crore by March 2017 and to 86.24 crore by end of July 2017. 

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