Has India become digital? The answer is, no!

As RBI released its annual report on demonetisation, and as the country came to know that almost the entire cash in denominations of old ₹500 and ₹1,000 notes has returned to the coffers of banks, the government and its intentions have faced a relentless assault of ridicule.

When Finance Minister Arun Jaitley found the government becoming a target of jokes, taunts and mockery from all quarters, he himself came to the rescue and declared that the objective of demonetisation was to establish cashless economy and that has been achieved.

After the government was exposed on demonetisation, this statement by the Finance Minister was not surprising at all. Because this is the summary of the government’s stand which it took considering the difficulties the common man, poor people and farmers were facing after demonetisation.

When the government became completely nervous and fretful amid the colossal disaster and mess created by demonetisation, the soldiers and ministers of the government immediately wove a story that the real aim of demonetisation was to end the cash transaction and create a cashless economy.

The way electronic payment companies thanked the Prime Minister for demonetisation in huge advertisements published on the front pages of all newspapers, conveyed that there was something fishy in the demonetisation business. This was also discussed to an extent.

The Prime Minister had asked for 50 days for things to be back to normalcy. But cash problem persists in some parts of the country even after eight months of demonetisation.

After the new narrative of digitisation through demonetisation, the country was flooded by a tsunami of advertisements promoting digital transactions. Digidhan fairs were organised all through the country, lucky draws were announced, officials and ministers made tall claims that the country has been catapulted from a cash economy to digital economy and sufficient cash is now in circulation.

The CEO of Niti Aayog, Amitabh Kant, even went on to say that “by 2020, all ATM machines, credit cards and swipe machines would be useless, because every Indian would be able to do monetary transactions only with a thumb print in the coming days.” The Prime Minister also, in his radio address, Mann Ki Baat, encouraged people to go for digital transactions so that the target of one year could be achieved mid-way only.

So, has India become digital? Have we shifted from a cash economy to a digital economy? Let’s have a reality check. Let’s analyse the data released by RBI and National Payment Corporation of India (NPCI) which are available in the public domain.

Let’s talk about the payment App launched by the government which was named BHIM. It was launched by the Prime Minister at a DigiDhan Fair organised in a stadium in Delhi on December 30, 2016. BHIM-Bharat Interface for Money was seen in relation with the Uttar Pradesh elections also. The BHIM App is connected to UPI-Unified Payment Interface. According to NPCI data, there was a marked jump in the number of transactions through UPI since October 2016. It was almost 56 times more than previous transactions. From January 2017 to May 2017, there was a two and a half times increase in transactions through BHIM. This data gives an impression that we have made a significant shift in the direction of digitisation. But wait, this is not the complete picture.

As per data released by RBI, ₹2,171 billion were drawn from ATMs in April 2017. Money drawn through any other means from the banks is not included in it. But amount drawn through UPI was only ₹22.41 billion. That means money drawn through UPI was only one per cent of the total money drawn via ATM.

Let’s have a look at another piece of data. By August 6, about 1.96 crore people downloaded the BHIM App. But there are 30 crore people in India who use smartphones. That means only 6.5 per cent people downloaded the App. This is also an important fact that only one per cent of the people who downloaded the BHIM App are regularly using it to make transactions.

Let’s take card payments now. After demonetisation, there was a significant increase in this medium of transaction. Since there was no cash, people used debit or credit cards for smaller payments too. But here too, the important fact remains that only 5 per cent of the total retail payment was done by card. According to RBI data, a total of ₹7,421 billion was paid by card while the total payment amount was ₹1,39,611 billion. That means the card payment was a little above 5 per cent of all transactions.

Thus, if we look at it, there was not much excitement or zeal apparent for digital transactions after demonetisation. If we look at previous figures, we come to know that there was a significant 53 per cent increase in digital transactions from 2011-12 to 2012-13. And from 2012-13 to 2013-14, there was a 49 per cent increase.

Let’s now consider people’s habit of drawing money from ATMs. After the announcement of demonetisation in November 2016, the ATMs went ‘cashless’ and people withdrew a total of ₹850 billion.

But by March 2017, people withdrew Rs 2171 billion from ATMs. In the two months before demonetisation, ₹2,223 billion were withdrawn in September and ₹2,551 billion in October, 2016. That means as soon as there was cash available in the market, people drew almost as much money as they were drawing before demonetisation. We can easily deduce that people started feeling comfortable in cash transactions once again. It is a different matter altogether that even now there is 20 per cent less cash in circulation in the markets.

In the retail sector, about 94 per cent of total digital transaction has been done by retail electronic clearing while the rest has been done by card. NEFT forms 86 per cent, NCH 6 per cent, IMPS forms 3 per cent of electronic clearing. That shows the even after a massive jump in UPI, the transaction done through it forms only 4 per cent of the overall transactions.

These data clearly show that the tall claims by the government about digital transactions are mere verbosity and have very little factual basis.