The Viability of a Cashless Economy

With the rapid development of technology, we read about the possibility of a cashless economy pretty frequently in newspapers. This article covers the basics of a cashless economy and its viability for a country like India.

What is a cashless economy?

A cashless economy is one that is heavily driven by the internet revolution of the 21st century and revolves around the notion that physical cash needn’t exist in the ‘money flow’ of an economy. It eliminates the need for hard, physical cash. Instead, transactions are carried out via digital means, through cards and smartphones.

The cashless economy is currently driven by innovations like mobile wallets (PayTM, PayPal, PhonePe) and prepaid instruments. The companies that bring forward these innovations mostly target the elite that is tech-savvy.


Is it ideal for a country like India?


The arguments made for and against a cashless economy apply to India as well as to any other developing country. This type of economy certainly has its benefits. In a cashless economy, the speed of transactions is faster, the ease of doing business increases, everything is documented and thus, catching tax fraud is easier. The reduction in black money, which usually inflates real estate prices, will lead to a decrease in real estate costs (Anna, 2017). Additionally, it gives a boost to SMEs (Small and Medium-sized Enterprises). In 2015, the Indian government spent 27 billion on currency management and issuance. This cost will drastically fall into a cashless economy, thus reducing the fiscal deficit. Clearly, a cashless economy has its benefits. However, it also has pitfalls. Two of them are: the issue surrounding privacy, and the people who are disadvantaged or left behind in a cashless economy.


The privacy issue: If all our transactions are documented on computers — from every cloth purchase to every visit to the grocery store — there is a dangerous issue of privacy that comes into the picture. Data of this scale and quality can be hugely beneficial to corporates and entities willing to shell out the money to acquire it (Sriram, 2015). If a cashless economy is to be followed, governments must enact new privacy laws, strengthen current defenses against cyber-attacks, and limit the extent of data that can be acquired by companies.

Losers in a cashless economy: Undoubtedly, the rural poor and the elderly will be impacted the most. Unless banking can become inclusive, the rural poor—who have no or limited access to physical banks or phones—will suffer (Sriram, 2015). A cashless economy counts them out, for they do not have the resources or the financial knowledge to operate within it. As of 2018, only 63% of Indian adults have access to the formal financial system (Business Standard, 2018). Aadhaar, if leveraged properly, could be used as a cushion when transitioning to a cashless economy. The Indian government does have infrastructure and policies like UPI, Aadhaar, Ispirit, the JAM Trinity and India Stack in place. However, more people need to be aware of their existence and use.

The knowledge factor is especially prevalent when it comes to the elderly, who either don’t understand new technology or refuse to let go of the traditional method with which they were brought up.

declassified cashless

The viability of a cashless economy is dependent upon the state of development in a specific country. A cashless economy is a good step forward in developed countries, where infrastructure is in place. However, for developing and underdeveloped countries, there is a lot that must be done in terms of access, infrastructure, and education, before one can embark on the journey towards the cashless economy.

-Ruhi Jain (Associate Editor, Declassified)


Further Reading:

Economic Times:

Motilal Oswal:



Anna, C. (2017). Cashless economy viability for India.  Retrieved from:

Anon. (2018). Data Tracker: India is far away from being a cashless economy. Business Standard. Retrieved from:

Sriram, M.S. (2015). Cashless transactions and the poor. LiveMint. Retrieved from:


Sources of pictures: 


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