In yet another clarification by the government after the demonetisation process began on November 8, Finance Minister Arun Jaitley on Thursday said that digital transactions are a parallel mechanism, not a substitute, for cash transactions and “cashless economy is actually a less cash economy as no economy can be fully cashless.”
Making his opening remarks at the fifth meeting of the Parliamentary Consultative Committee, Jaitley said, “The Government is trying to encourage digitization as much as possible because an excessive cash economy has its own social and economic costs and consequences.”
“He said that less cash can be gradually substituted to the possible extent through digital payments or transactions,” he was quoted as saying by a Finance Ministry statement.
The Government has given lot of incentives to the people to shift to digital mode of payment and the response is quite positive in this regard, the Finance Minister said.
He said that the Government and RBI are fully aware of cyber security challenges in the move and ensuring strong firewalls around the systems.
Jaitley assured the Members of the Committee about cyber security measures being taken by the banks under RBI supervision and the government was “trying its best to minimize common man’s pain.”
“Keeping in mind that Indian consumer is cost conscious, the Finance Minister said that the Government is providing various incentives for digital transactions including debit card use. Regarding the availability of POS machines, the Finance Minister Shri Jaitley said that POS machines are manufactured by two companies in China and the Government has waved off duties on them so that these machines become cheaper and reach the shopkeepers easily,” the statement said.
Admitting that there are visible and hidden costs in reducing cash volume in the economy, the government last week announced a series of eleven measures designed to increase the pace of digital payments.
Among the measures, payment by card for petrol and diesel will enjoy a discount of 0.75 per cent.
Customers will get a higher discount on digital payment as all central undertakings will ensure that the transaction fee and merchant discount rate (MDR) charges are waived on such payments, Jaitley said.
Suburban railway monthly and season tickets bought through digital payment will get a 0.5 per cent discount, effective from January 1, 2017, beginning with the Mumbai suburban railway network.
Jaitley also announced that online payment for public sector insurance companies (life insurance and general insurance) will get 10 per cent discount for general insurance and 8 per cent discount for life insurance for new policies sold.
