Notes to remember
If three-quarters of the population in an advanced economy like the United States appear to either favour cash payments or a mix of both cash and non-cash payments while making purchases, how challenging will it be for a developing country like India to transition to a so-called cashless economy? There are other interesting revelations in the survey that might hold lessons for India — Income has a bearing on payment preferences: the more affluent folks tend to favour non-cash payments while the less affluent tend to use cash ; demographics too had a bearing on the situation: African-Americans tend to favour cash payments more, Latinos and whites less; age makes a difference: compared to older people, the young are less worried about not having cash on hand. For instance, a report released in November by the Federal Reserve Bank of San Francisco makes four points: cash continues to be the most frequently used consumer payment instrument in retail transactions; it is widely used in a variety of circumstances; it dominates small-value transactions; and the average value of cash holdings has grown. The big picture, as outlined in the Finance Ministry’s Committee on Digital Payments’ medium-term recommendations, reveals that India’s cash to GDP ratio of 12.04 per cent is considerably higher than ‘comparable’ countries. “Some estimates indicated that the net cost of cash as 1.7 per cent of India’s real GDP in 2014-15,” its report said.
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