Context: With the outbreak of COVID-19, cash usage has seen a surge,which has further aggravated the apprehension of COVID transmission.
More on the news
- As per a report of RBI, the first two weeks of initial lockdown saw a jump of about ₹53,000 crore in cash available with the public.
- It saw a spike over the fortnightly average of ₹8,435 crore over the previous 12 months.
- The surge continued as lockdown continued further, in spite of apprehensions that RBI notes could act as carriers of coronavirus and advisories issued by authorities to opt for cashless transactions.
- As per several studies, the virus can survive on notes that pass through various anonymous hands for several hours, maybe even longer.
- Fibrous surfaces are reckoned to be less hospitable to the bug than smooth ones, but bits of paper that are not fresh off a printing press still pose a danger.
Reason behind popularity of currency notes
- There are three main reasons we typically keep money in its raw form.
- To spend on consumption
- Invest it in the hope of returns
- For contingency needs
- Also, there has been plenty of scarcity. In any seller's market, hawkers set the terms of a deal. Suppliers of vegetables, fruit and other daily-use items are insistent on cash payments.
- Households thus need currency just to keep kitchens going.
- As for investment, little is usually done by way of cash in a modern economy.
- Also, people scurry to ATMs at the first hint of a crisis.
- Anxiety spurs the need to keep emergency funds in a form as liquid as possible, and nothing beats the liquidity of cash.
- Covid-19 appears to have enlarged the stash that people keep in their cupboards just in case.
- While the digital measures are proposed as a panacea,the reality is that internet penetration is poor, wireless connectivity is patchy, and cash remains highly convenient in most of India.
- The lockdown has magnified these conditions.
- In order to decline currency demand, trying to persuade people to go cashless is not enough.
- Digital money needs to be seen as sufficiently liquid too.
- Apart from expanded acceptability, e-transactions should not cost sellers anything at all.
- Further, e-commerce firms should be allowed to sell anything that’s legal even in red zones, where they are currently allowed to deliver only essentials.
- Shortages in general need to ease. Lastly, people need an assurance that the economy will be looked after.
Image Source: Mint