Abstract
This paper analyzes India’s gradual transition towards a cashless economy. We present a theoretical model that evaluates decisions by consumers and sellers to adopt cashless payments. We then use data from surveys conducted in 2011 and 2014 (from World Bank’s Global Findex), as well as household and enterprise surveys conducted in 2009–2010 to estimate the amount of cashless transactions prevalent in India and identify the avenues that are successful and those that are not. We analyze instruments (cards versus point-of-sale versus mobile), micro units (individuals versus households versus retailers), and sectors to identify and estimate the enablers and bottlenecks. We find that the most crucial enabler of cashless payments are inflows of funds into the accounts. Based on our findings, we suggest possible policy interventions.
Highlights
This paper analyzes India’s gradual transition towards a cashless economy
We use data from the World Bank’s Global Findex surveys conducted in 2011 and 2014.12 A report based on the database shows how financial inclusion is increasing over the years (Demirguc-Kunt et al 2014)
This paper analyzes the key steps in making India gradually migrate towards a cashless economy
Summary
This paper analyzes India’s gradual transition towards a cashless economy. Globally, there is a tremendous interest among policy makers, academicians, and commercial enterprises to explore the possibilities of moving towards a cashless economy. The study found that a 1% increase in card transaction volume would increase consumption each year by 0.039% and GDP growth by 0.024%. Apart from identifying some of these benefits for India, there are two major issues we address: the share of cashless -both in terms of transactions as well as value and the factors that affect them most. This provides a roadmap to increasing the share of cashless transactions in the economy
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