Context:
The article discusses why the Government of India is increasingly discouraging cash usage and promoting digital payments, despite currency being legal tender issued by RBI.
Key Highlights / Details
Rationale Behind Reducing Cash Use
- Higher cash circulation fuels the informal economy and tax evasion.
- Handling and printing cash is cost-intensive for RBI and banks.
- Digital transactions improve transparency, traceability and ease compliance.
Policy Push Toward Digital Economy
- Government incentives for UPI, QR-based payments, and FASTag.
- Disincentives for cash use:
- Cash transaction limits under Income Tax Act Section 269ST.
- Higher TDS on cash withdrawals over ₹1 crore under Section 194N.
- Limits on cash donations and cash expenditures.
Impact on Economy
- Increases formalisation of transactions.
- Boosts financial inclusion and digital literacy.
- Enables better tax collections and revenue mobilisation.
Relevant Prelims Points
- Fiat money: Currency backed by government law, not by physical commodities like gold.
- Legal Tender: Must be accepted as a medium of payment by law.
- Digital India and India Stack include UPI, Aadhaar, DigiLocker.
Relevant Mains Points
- Role of digital payments in reducing black money.
- Ethics of currency disincentives affecting freedom of choice vs public interest.
- Linkage to data governance, cybersecurity and privacy concerns.