'The results are in. The Indian government's grand demonetization experiment has proven to be a bust, with cash continuing to thrive in the nation's economy,' explains the latest Global Cash Index™.
This PYMNTS report, a collaboration with Cardtronics, looks at the use of cash in India. Notably, cash continues to thrive in the sub-continent, even a year and a half after Prime Minister Modi's brutal cash ban. This may have sped up the process for digitization by a few years but was that worth the price paid by the most vulnerable?
Demonetization was launched in India in an effort to crack down on the nation’s underground economy, boost tax revenues and encourage the transition to a digital banking infrastructure. However, nearly two years after the policy launched in 2016, cash remains a key component of the nation’s economy...Based on current trends, the rate of total cash usage in India is expected to rise at a compound annual growth rate (CAGR) of 10.47 percent from 2016 to 2021.
'Several factors are working to keep cash in play, including India’s large rural population — which falls outside digital banking infrastructure’s reach — a thriving underground economy, low education levels and a general distrust of the banking system.'
Here are some notable findings from the latest Index:
- India has just six point-of-sale (POS) terminals per 100,000 people, far below the rate of other Asia-Pacific neighbors.
- India’s cash usage was 49.3 percent in 2016 and is expected to drop slightly to 46.2 percent by 2021.
- India spent $1.5 trillion in cash in 2016, far more than any other nation in the region.
- India has four bank branches per 100,000 people, a rate lower than Australia and South Korea, but more than Singapore.
“[Fearing] the absence of cash, people had no choice but to go to electronic payments.”
About The Index
The Global Cash Index™, a Cardtronics collaboration, focuses on the use of cash for making payments, and as a payment method that equally plays a role with cards, checks, direct debit and other methods of settling up between consumers and businesses. Unlike most reported estimates of cash, this proprietary data analysis focuses on the use of cash for making payments rather than hoarding.
Cash Matters A timeline of India’s Cash Ban
On 8th November 2016, India's Prime Minister Narendra Modi announced that the 500 and 1,000-rupee notes would be replaced with new 500 and 2,000-rupee notes in a radical attempt to crack down on 'black money, fake currency menace, terror funding and corruption'. Sadly, the population suffered severely while the goals were not met...
Cash Matters Modi's cash ban failed in its two big objectives
The objective behind India's abrupt cash ban was to crack down on criminal activity. News that the cash ban did not stop the shadow economy from exchanging illicit funds for legal tender leaves the world questioning the so-called benefits of the brutal policy.
Cash Matters India's cash crisis six months later
Half a year after Prime Minister Modi created the highly reported Indian cash crisis of 2016, the nation seems to be recovering from the economic shock... but not without learning a few lessons...
Cash Matters BBC: Does a cashless society benefit everyone?
Through interviews with a financially excluded Swedish pensioner Maijlis Jonsson, payment systems expert Professor Niklas Arvidsson and Mint editor Monika Halan, reporter Rob Young asks 'Who Needs Cash? in an radio episode for BBC Business Daily.