What Happened After India Went (Mostly) Cashless?
Back in the closing days of 2016, India embarked on something of a mad quest and decided to pull the plug on its 500 and 1,000 rupee notes. The currency, which was set to go from valuable to worthless over the course of a few weeks, would depart the market and take with it 86 percent of circulating currency in the country.
We know what happened immediately afterward; the frantic rushes to the banks, the economic pain that hit following a lot of people losing jobs after no one had cash to pay for services. It’s been about eight months, and now reports are coming in of what happened in the country after demonetization. The news is occasionally good.
The economic impact of the sudden shift was clear then and is clear today. Gross domestic product (GDP) growth in the country was at 6.1 percent in the May announcement, which sounds like a win only until you remember that the May 2016 announcement had it at seven percent. Annual growth rate was also down, from eight percent to 7.1 percent.
Good news, however, came from a widening of the tax base. Apparently, the Indian government “found” several million new taxpayers as a result of this process, reports noted, and ultimately brought these into the fold and contributing.
Further, mobile payments systems and processors were also huge winners here, as these would be the major new force in a cashless society. Aadhaar, a major new technology initiative featuring a 12-digit identification system, became a key focus in Indian lives setting up mobile payments options. Processors like Paytm have also found room to grow here.
In the end, we’ve learned that going forward with a cashless society can produce some substantial new advances and give a lot of companies big new opportunities in the field. Yet we’ve also learned that only gradual methods can truly succeed, producing the more positive end results without the immediate pain and economic structure that a rapid approach seems to have created.
Granted, eight months isn’t exactly a lot of time to study a major societal change, but based on what we’ve seen so far, it looks like slow and steady really does win the race.