As India and its citizens continue to feel the aftermath of the unexpected and unprecedented demonetization event – the ban of Rs 500 and Rs 1,000 notes, two of India’s biggest bank notes – Finance Minister Arun Jaitley has pointed a silver lining – “less cash transactions and an increase in digital currency.”
Speaking today, Indian finance Minister Arun Jaitley has opined that India will no longer see traditional cash numbers after the sweeping ban to render 86% of all cash in circulation obsolete, overnight, in early November. Instead, he sees the country moving toward a digital economy.
In quotes reported by regional publication Indian Express, the official stated:
Earlier, it was so much in cash and cheque. This was the Indian normal. Now there will be less cash transactions and an increase in digital currency.
Further, he sees businesses and trade volumes grow after the dust settles amid re-monetization, with “digitized expenditure and a developed tax system to become the norm.”
The cash ban, introduced by the ruling central government as an effort to curb money laundering and tax evasion has resulted in significant disruption in a country of over a billion people. While the actual numbers are hard to crunch, the impact on the Indian economy which has seen robust growth as a developing nation, is set to drop, according to experts. As spending goes down, so is consumption – “the main growth driver of the economy will likely be the biggest casualty in the months ahead,” according to one Indian economist.
Jaitley concedes that demonetization has disrupted the way of life, but argues that the advantages in the long-term outweigh the current cash crisis engulfing the country.
Of course, you will have disruption created because of the switchover [but] in the long run, advantages are going to be huge as far as the relative cost of disruption is concerned.
Jaitley’s latest comments come within days after stating that Indian banks should promote digital banking as cash remains hard to come by.
While the government puts the brakes on cash by wielding authority, Indians are flocking toward bitcoin – the biggest digital currency of them all – in significant numbers. As a trend, Google searches for ‘bitcoin’ and ‘buy bitcoin’ have never been higher. Neither has peer-to-peer unregulated trading volumes of bitcoin, which has nearly doubled previous all-time highs. Within 10 days of the demonetization, demand for the cryptocurrency saw it being sold for a 20% premium.
Toward the end of November, the premium was soaring further, as the price to buy bitcoin reached $985 while Indian bitcoin exchanges continue to push for adoption.
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