New Delhi: Confederation of All India Traders welcomes the government’s move to take effective steps to curb black money in the country. The Prime Minister’s announcement comes after considerable groundwork done in the last two years by the Finance Minister Arun Jaitley to boost electronic payments adoption in India. There is likely to be a short term effect on the market in terms of liquidity for the small merchants and retailers but CAIT believes this is likely to stabilise once supply of new notes is made sufficient. CAIT has made considerable efforts in generating awareness of digital payments in association with its partner, Mastercard, world’s leading payment technology company.
India is among the most cash-intensive economies in the world, with a cash-to-GDP ratio of 12 per cent. That is almost four times that of countries like Brazil, Mexico and South Africa. In fact, about 96 per cent of transactions here are conducted in cash. Only 3.6 per cent of households in India make cashless transactions. Further, the shadow economy in India amounts to 40 percent of GDP resulting in personal income tax compliance of just 29 percent or just one-third of revenue that is India’s due.
According to CAIT National President B.C.Bhartia & Secretary General Praveen Khandelwal , “Non-Corporate Small Business Sector (NCSBS) forms the economic foundation of India. It is also counted amongst largest disaggregated business ecosystems in the world which sustains upwards of 50 crore lives. The biggest threat to the NCSBS comes from online/ecommerce players along with large corporate/organised players who offer choice and convenience of digital payments. This not only allows a wider spectrum of consumers to walk in and transact into their stores but also helps them manage operations systemically. Given this announcement and reassurance from Prime Minister that the government is committed to improvise how we do business in our country, we feel it is about time that both small business owners/merchants and consumers to see underlying benefits of transacting digitally. It is critical that the Government considers suitable incentives and rebates for small merchants to adopt digital payments as done in the case of countries like South Korea and Uruguay. We request the government to setup a committee including representation from CAIT on strategies of implementation in line with the Government’s recent directive.”
There is an urgent need for government agencies and regulators such as the Reserve Bank of India (RBI) to now mandate financial institutions to invest and promote awareness and adoption levels amongst consumers, business owners and traders. Better utilisation of existing payment infrastructure and acceptance network and a level playing field for free market and competition is the need of the hour for all stakeholders to come together and participate in this digital drive.
Realising the full potential of e-payments as we move towards GST can benefit the Indian economy as a whole. It can usher in greater financial inclusion and benefit the SME segment which forms a significant section of the economy. It will be a win-win situation for the central government, states and the SME traders.