Cashless transactions scenario in India: An assessment after 3 years of demonetization

An attempt is made to estimate the overall transactions in the economy by first estimating the value of output by multiplying GDP with ratio derived using NAS data on output to value added for various economic activities/sectors. This value is then multiplied by ratio of transactions value ((Business to Consumer + Business to Business)/ Business to Consumer) to capture the implications of intermediaries involved. The share of cashless and cash transactions are estimated and intervention analysis is used to estimate the changes in trend/growth after demonetization. This is done for overall cashless and cash transactions as well as for various cashless instruments. The velocity of cash, deposits and broader money are also estimated. The initial success in cashless transactions has been achieved through supply side initiatives, such as, promoting installation of POS, e-transfer of bulk salary, bills and Direct Cash Transfer Benefits, etc. The RBI projected doubling of share of cashless in total transactions in next three years through financial inclusion of small users. Considering the dominance of cash in informal sector, any forceful promotion of cashless transactions may prove to be counter-productive. The greater emphasis, therefore, should be placed on bringing behavioural changes and in facilitating the processes.