reduce-the-countrys-preference-for-cash

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. 

Road Ahead

  • 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.

Source: https://www.livemint.com/opinion/online-views/opinion-reduce-the-country-s-preference-for-cash-11589215359688.html

Image Source: Mint