Does the Indian economy progress toward a cashless economy?

Abstract

The cashless payment system has been considered a critical driver for the country’s economic growth and development. Recently, financial institutions and services have undergone drastic changes due to rapid digitalization. Over the last 10 years, substantial progress has been made toward transforming India into an inclusive digital financial system, cost-effective, convenient, transparent, accountable and secure, bringing underserved and excluded rural people into the economic mainstream. All these efforts led to the transformation of India into a greater cashless economy. Despite the rapid expansion of digital financial transactions in India, cash still accounts for a significant share of payment. India observed a simultaneous growth of the cash economy and digital payments, which created a paradoxical situation. This situation twisted a lesson for policymakers who imagined all cash was shady and that digital must necessarily dent the cash economy. This research paper analyzes the trends and progress of digital payment for transactions in India and the developments to make India a cashless economy. It also examines whether a long-promised cashless society will become a reality, or will currency continue to play a critical role in everyday transactions, as it had for decades?