- In the last five years, millions of Jan Dhan accounts have been opened and the people on the bottom of the pyramid are using digital payments.
- The number of ATMs across the country grew by merely 1 percent in the last few years while the UPI transactions are growing at a rate of more than 100 percent even after the five years its launch.
- The primary objectives of demonetization like a crackdown on black money, increase in tax to GDP ratio, digitization of the economy, reduction in cash circulation had been achieved on a good scale.
It has been five years since demonetization, but the critics are yet to accept the fillip it provided in making India a global leader in the digital economy. In the last five years, millions of Jan Dhan accounts have been opened and the people on the bottom of the pyramid are using digital payments. The Modi government pushed for universal financial inclusion in the country since coming to power and it was one of the major objectives of the monumental step of demonetization.
Anand Mahindra, the celebrated industrialist shared a video to show how much the United Payments Interface (UPI) has impacted the common people of the country.
In a video shared by the Chairman of the Mahindra Group, a street performer is seen using a long pipe instrument to play music while being accompanied by a decorated bull. Clad in colourful decorative sarees with flowers tied around its horns and anklets near the hooves, the bovine had a modern accessory: a UPI scanning code on its head.
Do you need any more evidence of the large-scale conversion to digital payments in India?! pic.twitter.com/0yDJSR6ITA
— anand mahindra (@anandmahindra) November 6, 2021
As the master continues to play music, a man is seen scanning the code on his mobile and proceeding to pay! “Do you need any more evidence of the large-scale conversion to digital payments in India?!” Mahindra wrote sharing the clip.
The critics are yet to appreciate the role played by demonetization in making India the global leader in digital transactions. The number of ATMs across the country grew by merely 1 percent in the last few years while the UPI transactions are growing at a rate of more than 100 percent even after the five years its launch.
In the month of October, more than 4 billion transactions were recorded with a value of 100 billion USD. Demonetization paved the way for formalization, liberalization, and digitization of the economy.
Every economist/analyst has their own assessment of demonetization but the one-sided analysis without taking a holistic view and long-term impact will definitely lead to partial results. The primary objectives of demonetization like a crackdown on black money, increase in tax to GDP ratio, digitization of the economy, reduction in cash circulation had been achieved on a good scale. The ratio of central government’s taxes to GDP was 10 percent in the fiscal year 2014-15. if we take a look at the central government’s taxes to GDP ratio has gone up from 10 percent to 11.6 percent. This is a whopping 15 percent increase in the tax to GDP ratio.
The benefits that we as citizens will invariably derive from this improved tax compliance are better delivery of goods and services such as health and education from the government- Ayushman Bharat is a step in that direction for health while the government is taking many initiatives on education/skilling also.
Apart from this, we can also expect infrastructure upgrades across the country- something that the government has already been doing over the last four years but beyond that, what this means is that the government can speed up the process of India’s development. The biggest takeaway is that with this improved tax compliance and digitization, over the course of the next couple of years what we will witness is much more balanced and equitable growth. With the benefits of the disruption starting to show in tax compliance, it’s about time that we settle the debate and accept that it led to a positive structural change in the economy!
