How India can move to digital economy ?
On 8 November 2016, the Government of India announced the demonetisation of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series.Of Rs 15.41 lakh crore (15.4 Trillion) demonetised currency notes of Rs 500 and Rs 1,000 denominations, only Rs 10,720 crore (100 Billion) did not reach to the banks or the RBI.This means only 0.7 per cent of demonetised currency notes were junked in the exercise. This showed how good idea executed poorly end up in disaster for poor people.
Demontisation was done to bring back all black money and let people more to digital transactions but as mentioned above , black money objective didn't achieve and amount of digital transaction increased during during that period but decreased with time.
Action items :
- Demonetize big currency notes like 1000 or 500 or 200. Only small currency notes should be in service ( 1 paise , 10 paise , 1 Rs , 10 Rs , 100 Rs Only ). Enough time like 3months to 6months must be given for people to adjust , not like 2016 act.
- 100 Rs note should be placed with expiry date of 5 years with expiry date marked on each note. Old notes coming to bank must be replaced , not banned outright.
- 22% of "Cashless tax" should be charged whenever CASH money is deposited in the bank. This 22% can be divided as 15% to central government , 5% to State government , 2 % to bank itself. No cashless tax or maximum of 0.05% tax when using digital transactions like bank transfer , credit cards , UPI payments etc. This is make people to buy things with digital transactions and if bought using cash they would end up paying 22% more amount for same product.
- Due to small currency notes, people will not want to do big corruption as they would end up collecting sacks of notes , hard to hide.
- Due to expiry of notes , black money hoarders must have to submit it to bank eventually and end up paying 22% of tax.