When the Prime Minister announced the demonetisation of 500 and 1000 rupee notes on the night of 8 November 2016, the first reaction across the country was astonishment and disbelief. The main objective of this move was to curb black money, corruption and fake currency. With the price of inflation and commodities going up by the day, 50 and 100 rupee notes almost disappeared in the shopping. Demonetisation has been done twice before in India, first in 1948 and then in 1978 but on both those occasions the Indian economy was not so vibrant. The notes that were demonetized were of great value and very few people had such big notes. Therefore, the common man did not face much trouble then.
This time the effect of demonetisation was very wide. At this time, the 500 and 1000 rupee notes were the most popular, so due to their demonetization, people did not have cash to buy everyday items like bread, milk, eggs, vegetables and fruits. The common man worries every day about how the fees will be paid, how the salaries will be distributed.
The cash shortage in banks and ATMs added to the problems of the people. To deposit cash in bank accounts, to replace old notes, to take new notes and to withdraw a little cash from ATMs, it started to become hazy. There was only one thing that would comfort the common man and that was the stated purpose behind demonetisation such as finding black money and curbing the financial assistance to terrorism. In his address, the Prime Minister announced that this step will strengthen the hands of the common man in the fight against corruption, black money and fake notes. The common man, distressed by the problems arising out of the black money economy and the violent activities of terrorist organizations funded by black money, was pleased that a drastic step has been taken to put a stop to these activities.
The government’s objective was to find out the money
Another objective of the government behind demonetisation was to create a cashless economy. Cashless transactions have the advantage of transparency, in which all types of transactions can be tracked and monitored. This will help the government in tracing the amount being paid for terrorist organizations and other anti-national activities. With this, the white money held by the people will remain in the banks and the government will also be aware of it, so that this money will go back into the system and loans can be given to the needy people. But in a country where a large part of the population is illiterate and the infrastructure for digital transactions in rural areas is inadequate, it is not possible to make the economy completely cashless.
Therefore, an effort is being made to create a low cash economy i.e. a system of economy in which some transactions are in cash and the rest are digital payments. Incentives are being given and incentives are being given to those who are making digital payments, who are making arrangements to collect payments through digital means. The threat of cyber crimes has been a major cause of concern in a low cash economy. Digital methods reduce the risks associated with payments, but while cyber security-related threats exist, concrete solutions to combat cybercrimes also exist.
Often the cyber security threats arise not from technology but from the carelessness of the user. Therefore, there is a need to formulate more strict policies to ensure higher standards of cyber security and to take precautions to reduce the risk to the people. The economy has been digitized in various countries, somewhere it has been successful and elsewhere it has not been much successful. The most successful effort so far has been in Sweden.
How successful it will be in India will depend on how much awareness is generated in the large illiterate and semi-literate population of India, especially in rural areas, where there is little to no internet access. Effective government policies to address the problems of cyber security and wide-scale awareness campaigns to educate people can be expected to see India becoming a global force in the digital economy.