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Can India become cashless?

While India has made significant progress towards a cashless economy, there are several challenges and considerations that suggest a fully cashless economy is still some way off. Here are some key points:

Progress and Initiatives

India has seen a substantial increase in digital transactions, particularly after the demonetization drive in 2016, which pushed people to adopt digital payment methods like Unified Payments Interface (UPI), mobile wallets, and internet banking1 3 4.
Government initiatives such as Pradhan Mantri Jan Dhan Yojana, Direct Benefit Transfer (DBT), and the promotion of UPI have contributed to the growth of digital payments3.
The Reserve Bank of India (RBI) is developing a Central Bank Digital Currency (CBDC), known as the Digital Rupee, which uses blockchain technology and has been integrated with UPI4.

Challenges

A significant portion of India's population, especially in rural areas, lacks digital literacy and access to digital infrastructure. More than 60% of the Indian population lives in rural areas, and a quarter of the rural population does not own a cell phone or is computer illiterate2 3.
The informal sector, which is largely cash-reliant, constitutes approximately 90% of the Indian labor sector. This sector's transition to digital payments is a major challenge2 3.
Security concerns, such as hacking and online scams, are significant hurdles. The technology used for digital transactions is still vulnerable to cyber threats2 3.
Technical issues in banking and the potential exclusion of vulnerable segments of society also need to be addressed1 2.

Future Prospects

Despite the challenges, India is expected to make further progress. A report by Bain & Company suggests that India's consumption could become nearly 50% cashless by FY26, driven by the growth of digital consumers and the use of tools like UPI5.
However, achieving a fully cashless economy will require sustained efforts to enhance digital infrastructure, promote financial literacy, and ensure digital security1 2 4.

In summary, while India is moving towards a less-cash economy and has the potential to become a global leader in digital payments, becoming a fully cashless economy will take time and requires addressing the existing challenges related to digital literacy, infrastructure, and security.