E-payments must to check black money

The government has given a more concrete and definite shape to its plans to make financial transactions in all areas and at all levels free of cash transfer by making them electronic. The ministry had been exploring various ways for this and Finance Minister Arun Jaitley had made a promise in the Union Budget to promote the use of electronic payment to curb black money. The government had also appointed a committee seeking suggestions for this. The previous government had once moved in this direction by imposing a charge on cash withdrawals from banks but withdrew it later. It is more likely that the present proposals, which rely more on incentives than on penalties and charges, will work better. The draft proposals, which have been put in for public comments, are based on a better understanding of the system and the psychology of people who pay and accept money.

The draft proposes to make electronic transactions and card payments compulsory for all government and government-owned organisations. It also envisages offer of discounts on card transactions and cash benefits for users of electronic payment methods. It will be mandatory to settle transactions of values above a particular limit only electronically. Apart from these steps, an environment should be created in terms of policy which is friendly to electronic payment. Small traders may find it difficult to set up machines. The earlier proposal to reimburse to them the cost of machines should be pursued. It is important to ensure that those who accept and pay with cards do not have to bear any cost, as is the case now in some types of transactions. Instead, they should gain. Mobile payments system should be encouraged and promoted more than the use of cards because the use of mobiles is more widespread and easier.

It is well known that cash transactions are the backbone of the black economy. Electronic transactions, which have identifiable trails, will make it easier to deal with unaccounted wealth and income. E-payments have other advantages too. The expenditure involved in printing and storing currency can be reduced and the risk of storage can be minimised. E-payments have increased in the country over the years but a major policy push is needed to make them the dominant form of financial transactions. India is behind most other countries in the use of e-payments as it has a very high cash-GDP ratio. Modern economies have minimum use of cash and a high role for elec-tronic instruments. That should be the aim in India.