Top Advantages & Disadvantages of a Cashless Indian Economy

On the night of 8th November 2016, the honourable Prime Minister of India, Shri Narendra Modi made an announcement that the Rs 500 and Rs 1000 notes in circulation would cease to be legal tender from midnight onwards. Thus, with one announcement the Prime Minister transformed about 86% of the currency notes in the Indian economy to mere pieces of paper. The prime objectives of the bold move that the NDA government at the centre has taken is to curb the black money which forms a parallel economy in the country and eliminate the circulation of fake currency from the Indian economy. Terrorist financing is another main issue that prompted the government to go ahead with the demonetization move.

The move has by and large received the support of the Indian public despite the hardships being faced by them. A lot has been said and written about the scheme with both support and criticism pouring in from many quarters. The parliament remains paralyzed with the opposition and the government in serious disagreement over the issue. The government is now trying to move ahead towards a cashless economy and has launched a campaign to encourage people to shun liquid money altogether. Cashless transaction means using debit cards, credit cards, internet banking, e-wallets, etc for making payments and purchases instead of using hard cash.

cashless indian economy

Let’s have a look at some of the advantages and disadvantages of Cashless Economy.


  • Cashless transaction is only possible with white money which renders the black economy untenable. Black money is a major problem in India and the fact that less than 5% of all payments in the country are made electronically has not helped matters. The number of tax evaders in India is phenomenally high. Cashless transactions will help India get rid of this perennial problem because in financial institution based economy there are always transaction trails which make it extremely difficult to avoid taxes.
  • Real Estate prices would drop considerably because a huge share of black money is invested in this sector which inflates the prices in the real estate market.
  • The expenditure incurred by the RBI in printing notes would be considerably reduced. In the year 2015, the RBI spent Rs 27 billion in issuing and managing currency notes.
  • Prostitution, drug trafficking, terrorist financing, money laundering and many such activities are carried out only in cash. Cashless transactions would make the operation of such businesses impossible for the criminals. This is one of the major advantages for a crime ridden India.
  • Cashless transactions can be easily monitored by the government which will enhance revenue collection and consequently increase the funds to carry out developmental activities.
  • The citizens would no longer have to carry liquid cash with them. It would be sufficient to carry mobiles, cards or tablets. Digital transactions are being made available in even ordinary mobile phones which mean that it is not necessary to have only smartphones for digital transactions.
  • The majority of election funding in India is made through black money cutting across the political spectrum. Cashless transactions would make it impossible for the political parties to spend thousands of crores of unaccounted money for their election expenditures. The deplorable practice of buying the votes by distributing cash and alcohol to the people would also be eliminated. True democracy would be finally at work.
  • The welfare programs that suffer with the chronic problem of corruption and non-implementation would be greatly benefited. The money would be directly transferred to the beneficiary’s account and can also be easily traced by the government. The people would no longer be at the mercy of the corrupt government officials who have exploited the poor for far too long.
  • Counterfeit currency that is pumped into India to wage an economic war by the enemy countries would be eliminated by a cashless society.


  • Many poor people do not have bank accounts. Although the Jan Dhan Scheme launched by the government succeeded in bringing millions into the banking system, the process is not complete and many of the accounts are non-functional. The government has to rectify this problem and bring the entire poor and marginalized section into the banking system.
  • The small retailers in India deal only in cash and have not been able to invest in the digital infrastructure.
  • The taxes, surcharges and the fees charged on digital transactions need to be made liberal in order to encourage the people to adopt the practice. Otherwise the public would not be willing to move towards a cashless society.
  • Hacking and cyber theft are grave dangers that plague the digital world. Hackers can steal information and money from anywhere in the world. The challenge before the government is to put strong security systems in place to protect the online transactions from the hackers. Researchers have shown that it is easy to crack the PIN number and gain access to the virtual wallet by using a software, if the cyber criminal gets possession of the victim’s phone.
  • The Indian public is not much educated with regards to the benefits of using cards or online payment methods. A vast majority prefer using cash as a convenient method of payment. Even the card holders consider cash to be a quick method and easy method.

The government of India has to address many challenges to meet the objective of a cashless society. The onus is on the Narendra Modi led dispensation and the general public to successfully meet all such challenges.

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