As I have been saying in my regular columns, paper money is basically a token which is used to carry out transactions. You take the token out of the system, the transactions stop. Of course, paper money is not the only form of money. There are various other ways of carrying out transactions using cheques, credit/debit cards and payment apps, as well.
The trouble is that the Indian economy thrives on cash.
98 per cent of the consumer transactions in India happen in cash. By value, the figure stands at 68 per cent. As Credit Suisse points out in a recent report: “The distribution channels of everything from consumer staples and discretionaries, oil marketing companies, pharmaceuticals to even many two-wheelers operate primarily in cash. The non-institutional part of the cement and metal value chains also use cash. Truck operators also work primarily with cash (a driver would be given cash for diesel and tolls).”
In this scenario, it isn’t surprising that transactions across different markets all over the country have come down dramatically.
Vivek has worked in senior positions with the Daily News and Analysis (DNA) and The Economic Times. He recently finished writing a bestselling trilogy on the history of money titled, Easy Money. He has taught in several universities on the topic of Economics. He currently contributes to many of the top financial publications in India on top of writing his own publications, Vivek Kaul's Diary and The Vivek Kaul Letter.
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